FICCI EY Report Healthcare Report

Universal health cover for IndiaDemystifying financing needs

August 2012

Foreword

Universal Health Coverage (UHC) has been renewed on the global agenda given the reaffirmation of World Health Organizations commitment to health coverage for all as a universal right. The economic advancement in India has enabled the government to take the cue and clearly articulate its intent to increase the public financing of health to 2.5% of Indias GDP in the Twelfth plan to move toward affordable, accessible quality health care for all. The intent of the government is to strengthen the public health system and involve the private sector only for critical gap filling. However, looking at the fiscal deficit of 5.9% of GDP and the increasing investment from the private sector, the Planning Commission has suggested a greater role of the private sector in health care delivery. This is significant in a scenario where ~70% of the health expenditure is met out-of pocket. The two divergent lines of thought within the system have prompted FICCI to carry out this study to examine the global and Indian scenario on health care financing and suggest a way forward to achieve universal health coverage with a vision for Indian health care to be equitable, sustainable and of high quality.

In our view, the roadmap to achieving universal health care in a stipulated time frame needs to be created after taking into consideration all aspects of communicable and non-communicable disease burden, infrastructure availability, health care financing, human resource gaps, possible technology innovations, quality improvement mechanisms and reforms in institutional and policy framework. This would, in the long run, lead to a holistic mix of public-private delivery system, an invigorated preventive and primary healthcare focus, immunization programs, NRHM, NUHM and disease control programs and, most importantly, a monitoring mechanism that ensures quality and catalyses continuous self improvement while encouraging research, collaboration and innovation. The private providers, including corporate chains, would have a greater role in secondary and tertiary care. With 80% of infrastructure in the public sector and 80% of doctors in the private sector, there is immense scope for public-private partnerships to be leveraged for health care delivery provision but, most importantly, the public would receive integrated and appropriate care.

Federation of Indian Chambers of Commerce and Industry (FICCI) as a change agent has been working diligently toward influencing the government to bring about requisite policy changes for providing the right impetus to the growth of the health services sector that would reach out to the masses. This joint study by FICCI and Ernst & Young Pvt Ltd evaluates the progress of the health sector in India from 2008 to 2011, evaluates the international experience of universal health coverage programs, identifies lessons for India, studies demand- and supply-side financing issues, and suggests solutions and recommendations that would leverage public, private and public-private partnerships to move toward universal health coverage in India.

We are grateful to Ministry of Health and Family Welfare, Government of India, for supporting FICCI HEAL 2012 on the theme Universal Healthcare: Dream or a Reality? on August 27, 28 and 29 2012 at FICCI, New Delhi. We are sure that the deliberations in the conference will help us in coming up with concrete recommendations that will be submitted to the government at the highest level for consideration.

Ms Sangita ReddyChairperson

FICCI Health Services Committee, andED (Operations), Apollo Hospitals Group

At the outset, we would like to thank FICCI for having provided this opportunity to collaborate in the preparation of this knowledge paper. This paper aims to rationalize and recommend financing needs and potential incentives to generate appropriate quantum of funds with the required velocity of fund flow for facilitating a successful and sustainable Universal Health Coverage (UHC) program for India.

In 1943, Bhore Committee was set up to investigate and recommend improvements to the Indian public health system. It reported that, If it were possible to evaluate the loss, which this country annually suffers through the avoidable waste of valuable human material and the lowering of human efficiency through malnutrition and preventable morbidity, we feel that the result would be so startling that the whole country would be aroused and would not rest until a radical change had been brought about.

Although we have achieved significant progress in the last six decades on various health parameters, there has been no arousal, possibly because the exigencies of a subsistence economy, consumed in its agenda for Roti, Kapda and Makaan, did not offer adequate political mileage for health care. Hence, radical policy imperatives in this sector were not witnessed. Such reasoning, though never justified, is no longer relevant in the context of sustained economic development being witnessed by India. Health care is enjoying increasing political potency, as is demonstrated by several health care programs being launched by the central and state governments across political affiliations. Hence, we believe the time is ripe for a radical change in health policy. A sincere adoption of UHC as a policy imperative would be the best strategy to herald a health care revolution.

We believe all the apprehensions of an inordinate rise in health care expenditure in a UHC regime are rooted in the experience of some developed countries with high health care spend per capita. However, such expenditure is not an impact of the cover but is a consequence of key health policies maintaining scant focus on health outcome and cost control. As India embarks on this agenda, focus must be to preserve and improve on its unique advantage of a cost-effective healthcare delivery system based on a policy framework that incorporates learning from global experiences, both the good and the bad. We believe that implementing UHC has more to do with political will, social solidarity and effective governance than the ability of the state to ensure sustainable funding.

The main focus of this report is on the supply-side financing imperatives but it would not have been appropriate or rational to discuss that without understanding the context and contours of an effective UHC plan. Accordingly, this document has attempted to define the context of possible health care demand, role of the government and private sector, financing imperatives and critical success factors for establishing a sustainable UHC in its true spirit. Several aspects discussed in brief as critical success factors are at a principle level and need further deliberations and detailing, which is not the focus of this document.

It has been an enriching experience for us to work on this report, and we sincerely hope it further strengthens the mood, motivation and mandate for UHC in India.

Hitesh SharmaPartnerErnst & Young Pvt Ltd

Muralidharan M NairPartnerErnst & Young Pvt Ltd

Aashish KasadPartnerErnst & Young Pvt Ltd

Universal health cover for India: demystifying financing needs

Executive summary

Universal Health Coverage (UHC) is an evolved form of health franchise where the government guarantees equitable access to key promotive, preventive, curative and rehabilitative health interventions at affordable costs for all its citizens. In 2005, the World Health Assembly urged its member states to work toward UHC after considering the particular macroeconomic, socio-cultural and political context of each country.

Case for UHCHealth care expenditure has often been cited as one of the top three reasons for the population sinking into poverty even while a vast majority of citizens either struggle or fail to access quality care.

Cost of treatment largely unaffordable: Almost 80% of urban households and 90% of rural households are estimated to find average cost of in-patient treatment to be almost half of their annual household expenditure1, indicating a high degree of financial hardship. It is estimated that 3% of Indias population slips below poverty line each year because of health-related expenses2.

Utilization of health care services depends on affordability: According to the NSSOs 66th round survey of household expenditure on various goods and services, between the bottom-most decile and the highest decile of MPCE classes, the number of people reporting the use of in-patient care in urban and rural areas increases by 2 and 3.5 times, respectively.

Significant population remains untreated: Nearly 12%15% of reported ailments are estimated to remain untreated due to the cost of treatment being unaffordable3. This number could be much higher in real time, as sensitivity to ailments is a function of the ability to avail health care. This is illustrated by the number of persons reporting ailments being 4 to 5 times higher in states such as Kerala with per capita GDP being 4 times that of Bihar4, assuming that per capita GDP is considered as an indicator of households propensity to pay.

Inequitable distribution of infrastructure: Though rural India bears three-fourths of the ailment burden, it has only one-ninth of the total number of beds and one-fourth of the number of human resource for health5.

In any given developed society, it is the governments duty to reduce such hardships of its citizens through a commitment toward UHC. Previously, the economic challenges of being a subsistence economy may not have been conducive to adopt UHC as a policy imperative. However, with India now well on the path of economic resurgence, the time has come to actually turn the dream of UHC into reality. Although the economic benefits of UHC may not be quantifiable, the benefits are likely to be substantial in terms of impact on GDP through increased productivity from a healthy population and the creation of employment opportunities in the health care sector (estimated at ~50 lac direct employment by 20226).

Financing UHC: Global references may not be relevant for IndiaWhether the provision of UHC impacts financial sustainability of a nations health care system has been frequently discussed in health policy debates. The challenge of financing UHC is often evaluated in the light of rising cost pressures against limited resources and is, consequently, relegated as a utopian concept.

Health care spend as a % of GDP across most nations that have achieved more than 80% coverage of population through universal health systems is 5%12%, with exceptions such as Thailand (3.9% of GDP) and the Philippines (3.6% of GDP)7.

To assume appropriateness of these reference points as benchmarks and take them as representatives of the typical cost burden of UHC may not be correct in the Indian scenario. On the contrary, the efficiency of health care systems, and policies and practices adopted by nations (which in the case of India are unique and may not be comparable with other countries) define costs of health care delivered and, consequently, the extent of GDP spends on health care.

In India, the lower affordability of average citizens has led to the creation of systems and policies that are capable of delivering health care at low costs. We need to be acutely sensitive of preserving them while creating a UHC system that is sustainable at a reasonable level of spend while ensuring outcomes that are comparable globally.


Estimated expenditure on UHC The implementation of UHC is likely to increase the

consumption of health care services. A sharper increase is anticipated in the short term, when a large latent need is addressed. Hence, total expenditure on health is likely to increase.

Given the scale of implementation and infrastructure constraints, it may be prudent to assume a 10-year timeframe to accomplish UHC in totality. It is estimated that government health expenditure of 3.7%-4.5% of GDP in 2022 would be required to implement the UHC

program, covering out-patient (consultation fee, drugs, diagnostic tests) and in-patient (ailments covered under RSBY and Aarogyasri)* services for the entire population, assuming that hospitalization rate increases to match the hospitalization rate of the top MPCE urban classes (with potential access to and ability to afford most of their health care needs).

Including OoP expenditure, it is estimated that the total spending on health would be between 5.5%-6% of GDP. China, which has embarked on a journey toward UHC and has covered 84% of its population, spends 5.1% of GDP on health, of which 2.7% is spent by the government8.

Plan Pool

Pay

Provide

Purchase

Indi

vidu

als

Prov

ider

sQuality oversightTechnology for access and governanceFocus on preventive care aided by social determinants of health Cost control regulations on inputs

Guiding principles

Enablers

Dem

and

side

na

ncin

g

Sup

ply

side

na

ncin

g

Efciencies

Capital

Allocative

Technical

Dynamic

1

2

5

3

4

Equity and efciency of funding Equity and efciency of delivery

UniversalityCoverage of entire population irrespective of income level, occupation, religion, caste, gender, age group, geographic region

Equity in access to quality careAt an affordable cost as well as equity in nancing the program such that households contribute based on ability to pay

Comprehensiveness in servicesInclusion of preventive and promotive care apart from curative and rehabilitative care

Assured quality of careTo all through legal and regulatory frameworks that enforce adherence to standardized quality norms among providers

Respect for patient choiceFreedom to select between treatment options, provider options and doctors

* Estimated to cover 90% to 95% of ailments by volume

Framework for financing UHC in India


Key features of the proposed UHC program for India

Stages in UHC Key features of the proposed UHC program for India

Plan Target coverage with minimal OoP expenditure

Mandatory coverage should be extended to 100% of the population over 10 years. Both OP and IP services should be covered under a well-defined basic health package. OoP expenditure should not exceed 20%30% of the total health expenditure, i.e., mainly

copayments, for availing excluded services/higher hospitality care.

Pay Raise sufficient and sustainable revenues from payers, efficiently and equitably

Health is a state subject and health risks, political will and economic ability of providing health care vary significantly across states. To truly universalize health care, pooling of political will is required to align and unify UHCs design and implementation across the country.

Accordingly, funds should be collected centrally through general taxation (health cess/surcharges/income-rated contributions as an equitable source of financing the program). Alternative modes of raising funds (e.g., sin taxes, sector-specific taxes, contributions from allocations/auctions of natural resources by the government) can be explored as per requirement.

Value of health care availed should be perceived by the consumer: Nominal user fees or copayments (10%20% of expenditure) should be levied, with exemptions to specific groups, viz., below poverty line (BPL) families. Gradually, copayments can be phased out with the maturing of primary care and triaging models.

Pool Consolidate the raised funds at a national level to facilitate equitable allocation to states, as per their respective needs irrespective of contribution to funds raised

States have varying levels of income and risk profile. For effective financing and risk neutralization, there is a need to pool the funds at a national level and allocate them to states in alignment to their respective health risk needs irrespective of the contribution to funds raised.

Purchase Transfer pooled resources to health care providers on behalf of the covered population

Health care should be purchased by insurance agencies that may or may not be state specific and are selected based on a competitive bidding process.

Payment from the purchaser to the provider should be based on the achievement of the desired clinical outcomes and efficiency rather than fee for service model that only incentivizes revenue generation.

A rationalized tariff fixing policy should be adopted that defines differential reimbursement rates for stratified provider groups based on technical and financial criteria.

Provide Ensure quality and adequacy of health care delivery with minimum waste of resources

The private sectors involvement should be encouraged in specific focus areas to complement public health care provision through targeted supply-side financing to aid infrastructure generation, its equitable distribution and efficient delivery of health care services to make UHC effective and sustainable.

A robust governance mechanism should be instituted for:

Quality of service: Standardize quality of delivery through standard- and evidence-based treatment guidelines; focus on clinical outcomes; fix provider empanelment criteria, accreditation and rating of providers; and monitor the delivered quality of treatment (clinical quality and patient experience).

Tariff fixation and monitoring: Fixation of reimbursement rates (which could vary by rating of providers, region of operations), and audit and monitor compliance with reimbursements rates.

Appropriate use of technology to drive operational efficiencies and governance

Integrated and interoperable EHR systems across all providers to monitor compliance with treatment protocols, monitor contractual compliance, collect basic health and epidemiological data, and ensure clinical governance.

Implement hospital management systems to drive operational efficiencies and effectiveness.


Critical success factors for an effective and sustainable UHCThe evolution of healthcare will closely mirror the economic development of the country. Assuming that the average GDP growth of 7% witnessed over the last few years continues for the next decade as well, key factors that will decide the success of UHC program are as follows:

1. Focus on health outcomes: It is critical to calibrate the aspiration of UHC and the enhanced spend on health care, with an equally sharp focus on improving health outcomes. This is necessary not only to limit any wasteful expenditure but also ensure that focus is on health and not merely sickness. Key levers for focus would include:

a. Reducing disease burden through a robust and functioning primary care system, including prevention, early detection and out-patient care. It is an accepted fact that reducing morbidity is the most effective strategy for attaining the best return on health investments. RSBY studies also indicate that the hospitalization ratio in a district is negatively correlated to primary care usage as shown below.

In the Indian context, this becomes all the more crucial considering that primary health care is known to be inadequate and ineffective in large parts of this country. Further, given the scarcity of specialists and inpatient infrastructure and the time it takes to increase the rate of supply, coupled with the massive fiscal burden of financing health care for 120 cr people, effective primary care will inevitably be the anchor for UHC. It is estimated that two-thirds of government expenditure would still need to be incurred on primary, promotive and preventive care with emphasis on mother and child care, advocacy and outreach programs for screening and awareness programs for non-communicable diseases.

Quartile of PHC usage

District hospitalization ratio %

Lowest 3.1

Highest 2.0

Source: Performance Trends and Policy Recommendations - An evaluation of Mass Health Insurance Scheme of Government of India, RSBY working paper, September 2011.

b. Quality of in-patient care: To keep UHC from becoming a farcical expenditure, it is imperative to monitor the quality of in-patient care, along with facilitating the effective utilization of the available infrastructure. This would necessitate a regulatory environment driven by an independent agency (on the lines of NABH, which is an autonomous body on quality and accreditation in the country) that assures quality delivery through the formulation of standard treatment guidelines, accreditation of hospitals, design of basic health package, audit and monitoring protocols and strengthening of diagnostic services at public health facilities.

c. Integrated approach: This will ensure adequate focus on allied determinants that have a critical impact on health, mainly nutrition and sanitation.

Under-nutrition is estimated to contribute to nearly 30% of total disease burden of developing countries such as India9.

The country has a huge under-nourished population of ~38 cr and an even higher proportion of calorie sufficient but nutrition deficient population of ~57 cr10. This necessitates not only food security programs but also focused government interventions in the form of a massive national public advocacy program aimed at inculcating behavioral and attitudinal changes in the population. This will be similar to the national anti-smoking campaign launched successfully a few decades ago.

Further, pediatric malnutrition is a key risk factor for 22.4% of Indias disease burden11. The 036 months age group is the window of opportunity to establish the foundation for good health, after which many of the deficiencies are set for life. However, most child nutrition programs focus on subsequent age groups.

Inadequate sanitation is estimated to cost India 6.4% of GDP, with health constituting nearly 72% of the composition of sanitations economic impact12. Two conditions diarrhea and acute


lower respiratory infections account for nearly three-fourths of the total health-related impact. Thus, it is imperative for the government to focus on comprehensive sanitation and hygiene interventions to avert a significant proportion of consequent adverse health impacts.

2. Taking care to where the patient is: It is critical to ensure adequate generation and equitable distribution of supply of health services under a UHC program. Key levers for focus would include:

a. Filling the physical and human infrastructure gap with focus on correcting distribution inequity

Physical infrastructure

While 2 beds per 1,000 population is often cited as target for India against the current level of 0.9 beds per 1,000 population, it is estimated that despite increased demand, at current level of efficiencies, 1.7 beds per 1,000 population would suffice. The required number can still be lowered provided adequate focus is on:

i. Primary care, as studies indicate that a 1% increase in primary care usage can reduce hospitalization rate by 0.03%13

ii. Reducing average length of stay by focusing on operational efficiencies

iii. Promoting day care/short stay centers

The government should place higher focus on states where bed density is lower than the national average; these include Madhya Pradesh, Orissa, Bihar, Haryana, UP, Assam and Rajasthan.

Bed density per 1000 population across states

0.35

Source: Fostering quality health care for all, EY-FICCI report, 2008

0.46 0.51 0.54 0.55 0.590.71 0.8

0.86

MP

Oris

sa

Biha

r

Har

yana

J&K UP

Ass

am

Raja

stha

n

Indi

a

Doctor density per 1,000 Key states Focus

0.30.4

Bihar, Chhattisgarh, Gujarat, Jharkhand, Orissa, Rajasthan, North eastern states (excluding Mizoram and Manipur)

High

0.40.6 Madhya Pradesh, Kerala, Uttar Pradesh, Tamil Nadu High-medium

Source: Situational analysis of health workforce in India, PHFI, 2011

Human infrastructure

Over the next decade, another 9 lac graduate doctors would be required for primary care services and around 1.2 lac specialist doctors for secondary and tertiary care services. For this, 20,000 undergraduate medical seats need to be added by 201814. Again, the focus should be on states with relatively lesser number of medical seats per capita of population, namely, Bihar, Uttar Pradesh, Madhya Pradesh and Rajasthan.

In addition to doctors and specialists, approximately 13.6 lac nurses and midwives, and a large number of paramedics will be required over the next decade.

Capital expenditure on the proposed addition of physical and human resource infrastructure is estimated at around INR2,49,300 cr. This includes estimated expenditure to the extent of INR30,000 cr for setting up 200 medical colleges, which will result in the addition of 1 lac beds15.

b. Integration with other schools of medicine: The government should promote pluralistic health care by integrating the vast network of AYUSH (7.85 lac registered practitioners, ~3,200 hospitals, ~25,000 dispensaries16) in health care delivery. This would include focus on the following:

The government should mainstream and productively deploy AYUSH to achieve national health outcome goals (involvement in national schemes such as Janani Suraksha Yojana, Integrated Child Development Scheme, non-communicable disease programs: National Program for Prevention and Control of Cancer,


Diabetes, Cardiovascular Diseases and Stroke; this will necessitate the institutionalizing of an enabling framework (legal, financial, administrative) for training and deploying AYUSH workforce in health care delivery.

The government should offer bridge courses in allopathic medicines to train AYUSH doctors as family physicians and provide them with license to practice in rural settings; adequate controls should be built in to restrict treatment to identified disease groups using standard treatment protocols, monitoring of parameters such as health outcomes, timeliness of referrals and avoidable hospitalizations. These guidelines can be common to all primary care physicians engaged under UHC.

The system should entail quality assurance initiatives for mandatory certification of components raw materials, education programs, manufacturing units, AYUSH drugs

c. Technology-enabled healthcare: The government should leverage technology interventions to primarily address access constraints while fostering an environment of health care delivery that focuses on greater personalization and citizen-focused public health and medical care. Technology-enabled interventions such as remote medical advice, health call centres, tele-radiology, emergency response and e-learning platforms can play a significant role in ensuring timely access to quality health care.

3. Ensuring strong focus on cost of care: To ensure that the financial burden of an UHC is managed effectively, the UHC regime demands a strong culture of cost consciousness. Key levers for focus include:

a. Drug price policy and generic adoption: Considering that drugs constitute nearly 70% of out-patient expenditure17, measures to control the prices of essential drugs and mandating the adoption of generic generics will become crucial for cost-effective healthcare delivery. To increase the adoption of generics, an effective quality monitoring regime needs to be institutionalized to assure product integrity, given the current sub-optimal state of regulatory compliance. In this context, the

Tamil Nadu Governments drug procurement and distribution model would be a valid reference. The model has instituted effective measures for ensuring quality compliance, transparency in procurement, and distribution and prevention of irrational use. Also, once product integrity is established, the adoption of generic generics by the private sector to rationalize costs will be inevitable. In addition, pricing policy for patented drugs must also recognize country context and use reference pricing with appropriate rationalization for purchase price parity and per capita income.

b. Indigenous medical technology: Considering that nearly 75% of medical devices are imported18, it becomes imperative to promote indigenous medical technology in low resource setting to drive down cost of care. It is crucial to invest in local Indian technologies to radically value engineer cost, reduce operator dependence and increase consumerization potential, i.e., aid point of care delivery closest to the patient. Typical thrust areas for low-cost indigenous research aligned to the countrys disease burden could include lab on chip platform technologies for pathology tests, X-ray/USG machines, non-invasive screening technologies, glucose monitoring, imaging biomarker development and surgical technologies.

c. UHC reimbursement rates: The government should formulate a rationalized reimbursement tariff that defines differential rates for stratified provider groups based on objective criteria. This should be coupled with optimal payment models that orient away from fee for service to reimbursement mechanisms that incentivize efficiency and outcomes (such as DRG-linked payments, fixed and variable reimbursements with bonus payouts).

d. Administrative costs: Administrative costs in the US health care system are estimated to be 14% of all health care expenditure19. While embarking on the UHC program, it would be important to design a simple, standardized and efficient system.

4. Enabling governance: An effective and efficient UHC regime demands optimal health system governance that ensures transparency, defines the appropriate levels of checks and balances to secure integrity of delivery and


provides granular epidemiological data for evidence-based decisions. Key levers for focus include:

a. Centre-state role and accountability: Given that health is a state subject and political will toward health may differ across states, the center needs to play a dominant role in designing UHC in a way that also recognizes state-specific differentials. The state governments should augment centrally raised funds with state-specific financing, as well as implement and roll out these funds with well-defined rules of engagement and accountability between the center and the state.

b. Use of technology for transparency and managerial effectiveness: Given the scale and complexity of implementation, interoperability and effective use of technology will be critical for ensuring efficient transaction processing, monitoring compliance with treatment protocols, monitoring contractual compliance, collecting basic health and epidemiological data and ensuring clinical governance. This presumes unique identification assigned to each citizen.

5. Building Centers of Excellence (CoE): The adoption of UHC as a policy imperative will entail providing access and affordability to all in the short and medium term. Advancement of care will also be an equally important imperative to attain UHC in the true spirit. This will necessitate seeding investments to build CoE for medical needs that are relevant to Indian epidemiology and in designated geographic zones that are accessible to all for

the most complex of care. This will help the country attain medical and research excellence. This may necessitate setting up 10 AIIMS-like institutions in the coming decade with wide geographical coverage and non-metro penetration. This will not only advance care but also be an effective catalyst for bridging human resource distribution gaps (particularly in the case of specialists).

Case for supply-side financing to deliver on the critical success factors for UHCWhile it can be argued that with the government financing the demand side, supply-side incentives should be avoided or minimized in UHC, increasing the efficiency of the health system would require targeted supply-side financing to:

Initiate and calibrate the required velocity for infrastructural capacity generation and distribution through capital efficiency.

Enhance output of the health system by channelizing investments toward components wherein marginal cost of producing health care is less than the margin benefit derived through allocative efficiency.

Minimize cost of inputs for a given level of quality output through technical efficiency.

Optimize the rate of technology adoption to improve outcomes and governance, and rationalize cost through dynamic efficiency.

Critical success factors for UHC

Role of public and private

Rationale for incentivizing private sector participation

Recommendations on supply-side financing for the private sector

Public Private1. Focus on health outcomesa. Reduction in disease

burden through a robust and functioning primary care including prevention, early detection and out-patient care

H H The government will continue playing a predominant role and actively invest in critical gap filling in primary care, given its sub-optimal current state (62% shortfall in health workers, 36% shortfall in doctors and technicians across SCs and PHCs20). However, given the importance of primary care in the UHC agenda, private sector participation should also be encouraged.

For radiology labs: Deduction of 150% of capital expenditure incurred prior to the commencement of operations or for expansion at any time

100% deduction of profits and gains derived from business of operating and maintaining primary health care chains operating beyond Tier 2 towns to be granted for 10 consecutive assessment years in any 15-year period starting from the date of operation

Public private partnership models for private sector participation in screening and detection programs of the government, and in strengthening diagnostic services in public health facilities

H High, M Moderate, L- Low






Public Private2. Taking care to where the patient isa. Address inequity in the

distribution of physical infrastructure (hospital beds)

M H Significant investment requirements INR2.49 lac cr for additional 11.4 lac beds in focus states21

Given the magnitude of investment, both the public and private sectors will have to step up their roles, particularly the latter as the government would already be financing the demand side

There would be a need to rationalize capital expenditure and enhance capital efficiency as: a) reimbursements under UHC would be rationalized, potentially earning lower revenues per patient and b) health care investments have a long gestation with payback period of five to seven years

Healthcare to be accorded infrastructure status 100% deduction of profits and gains derived from business of operating and maintaining a hospital to be granted for 10 consecutive assessment years in any 15-year period starting from the date of operation subject to the following conditions:

Any location in specified focus states (Madhya Pradesh, Orissa, Bihar, Haryana, UP, Assam)

Tier 2 and below towns in other states (to be designated based on infrastructure need status)

Hospital targeting to serve patients only under UHC in any location

Eligible hospitals to have at least 100 beds and, as an exception, include day care centers

This can enhance project IRRs by 5% 6%, increasing project attractiveness

Eligibility for loans on a priority basis at concessional rates (2%3% lower than typical borrowing rates) similar to those in the infrastructure sector

Viability gap funding by the government under the PPP arrangement, i.e., one-time grant/annuity from government (certain % of project cost) in case expected revenues during concession period to the private provider are not enough to make the project financially attractive in tier 2 and below locations

150% deduction of capital expenditure incurred prior to the commencement of operations or toward the replacement of old machinery/equipment or for expansion at any time

Reduction of import duty on medical equipment

b. Address inequity in human infrastructure distribution

H L Provision of medical education to doctors should be a prerogative of the government, unless it is not able to add medical colleges. In this case, the private sector can participate within a well-defined framework to ensure transparency and merit in admission and quality of education.

PPP arrangements such as free/concessional land and the use of eligible public health care facilities for medical colleges by the private sector in focus states (Uttaranchal, Haryana, UP, Bihar, Jharkhand, Chattisgarh, MP, Rajasthan)






Public Privatec. Technology-enabled

health careM H Since the creation of new

infrastructure and the addition of specialists will take time, there will be need for private interventions that promote access within constraints of current resources (physical and human).

250% deduction of approved expenditure incurred on operating technology-enabled health care services (telemedicine, remote radiology, etc.)

Deduction of 150% of capital expenditure incurred prior to the commencement of operations or toward the replacement of old machinery/equipment or for brownfield expansion at any time

3. Ensure strong focus on cost of care

Indigenous medical technology

M H High dependence on imports currently

250% deduction of approved expenditure incurred on R&D activities related to indigenous development of medical technology (Made in India, Made for India)

4. Enabling governance

Technology for transparency and advancement of care

M H Adoption of technology will be a critical enabler for governance imperatives and also for efficient and effective delivery of care. Given the benefits in the longer term, propensity to invest could be low among providers.

Adoption of EHR and EMR should be mandated in a phased manner.

250% deduction on investment made for the implementation of EMR and EHR

Penalties for not sharing outcome/epidemiological data with the government

5. Building CoE

Advancement of care H L With an imperative for research and institution building, and for providing high-end affordable care to all, the government will have to play a dominant role. Nevertheless, given the size of our country, private sector participation will be inevitable.

PPP models, including viability gap funding, if private sector participation is deemed essential in creating COE

1Universal health cover for India: demystifying financing needs

Contents

Chapter 1: Health care scenario an update 2

Chapter 2: Financing UHC in India Section A: Case for UHC 10Section B: Relevant global experiences and imperatives for India 15Section C: Demand model and financing requirements for UHC 33

Annexures 46

2 Universal health cover for India: demystifying financing needs

The size of the health care sector grew rapidly from US$22bn during 200405 to US$60bn during 20111222. Further, social health indicators have also displayed marked improvement. In line with this, life expectancy at birth went up from 32 years during the independence era to 65.4 years in 2011. It is noteworthy that the improvement in life span between 2005 and 2011 has been much sharper than that recorded from 1990 to 2005. At the same time, infant mortality rate has seen a steady reduction.

Infant mortality rate (per 1000 population)

146

110

80

5647

1950-51 1980-81 1990-91 2005 2010

Source: Fostering quality health care for all, EY-FICCI, 2008; SRS Bulletin, December 2011

Our 2008 report, Fostering Quality Health care for All, had highlighted certain key challenges around health care services pertaining to accessibility, affordability and assurance. These four years have ushered in many positive changes, highlighting the increased and due focus granted to health by policy makers, providers and people at large.

Chapter 1Health care scenario an update

32

5059 63

65.4Life expectancy at birth (years)

1950-51 1980-81 1990-91 2005 2011

Source: Fostering quality health care for all, EY-FICCI, 2008; Human Development Report, UNDP, 2011


Below is a summary of the key issues discussed in the 2008 report and some of the significant steps that have been taken or initiated:

Theme Key issues

Access (how conveniently can people avail quality health care?)

Inadequate health care infrastructure, with 0.7 beds per 1,000 population as compared with facilities available in other large developing economies (Brazil with 2.6 and China with 2.2 beds per 1,000 population)

Inadequate and ineffective public health care infrastructure, especially in rural areas, making it largely unresponsive to local needs

Low density of human resources for health: inadequate number of doctors (0.6 per 1,000) and nurses (1.3 per 1,000)

Affordability (to what degree is health care affordable?)

High out-of-pocket expenditure (70%) for health care services, of which majority (~70%) is spent on drugs

Low penetration of insurance (12%)

Assurance (what are the measures being taken to assure patients on quality of care being delivered?)

Both the private and public sectors lack adequate provisions for regulations, standards and accreditation, with only 19 NABH-accredited hospitals in 2008


While these issues still exist, the governments efforts have brought about respite to varying extents.

Aspect Recommendations Progress

Access

Increase physical health infrastructure (beds from 0.862/1,000 by 2025)

Enhance access to health care services and bridge inequity among states

Facilitate changes to enhance availability of qualified clinicians

Affordability Extend coverage of health insurance to 50% of the population by 2015

Assurance

Implement a regulatory framework by making the registration of clinical establishments mandatory and by deploying an effective implementation mechanism

Promote technical competence of health care facilities through accreditation

Market-driven approach

Consumer awareness creation

Implement provisions to update intellectual capital by making Continuing Medical Education (CME) mandatory for the re-registration of all human health care resources

Establish an autonomous body to rate hospitals on a set of defined parameters related to health care outcomes

High Medium Low

AccessRural health infrastructure has been significantly strengthened, enhancing accessibility to health care services for the rural populationWhile the number of public health care facilities marginally increased between 2007 and 2011, the capability of such setups was stepped up significantly. The number of community health centers (CHCs) was increased by 19%, while the number of primary health centers (PHC) and sub-centers (SC) was increased by 7% and 2%, respectively.

Number of Public Health care facilities

1,45,272

1,48,124

Sub-centres

Source: Bulletin on Rural Health Statistics in India, Ministry of Health & Family Welfare, 2007 & 2011.

22,370

23,887

Primary Health Centres

4,045

4,809

Community Health Centres

2007 2011


The increased service delivery capability of these facilities is likely to facilitate greater access to health care services.

Number of institutions working 24x7 Female health care workers and nursing staff

Specialists and pharmacists Radiographers and technicians

1,263 980

7,793

6.2 times

62%

35%

45%

26%

31%

18%

4 times3,985

PHC CHC

2005 2011

2008 2011 2008 2011

2008 2011

153,568

44,936

207,868

65,344

Health worker /ANM at sub-centres & PHCs

Nursing staff at PHCs and CHCs

4,279

20,956

6,935

24,671

Total specialists at CHCs

Source: Bulletin on Rural Health statistics in India, Ministry of Health & Family Welfare, 2008 & 2011

Pharmacists at PHCs and CHCs

Lab technicians at PHCs and CHCs

Radiographers at CHCs

1,695

12,886

2,221

16,208

Human resources in the health care domainShortage in the number and quality of human resources employed in the health care sector will remain an area of concern in the short term. Nevertheless, the government has initiated several steps in this direction that could potentially spell some relief.

The government has set up medical, dental, nursing and AYUSH colleges in the last three to four years. This has resulted in an increase (34%) in the number of first year MBBS admissions. While 48 medical colleges were set up in the last four years, another 200 institutes need to be opened in the coming decade23.


Number of colleges Number of admissions

266 267

477

314 289

508

MBBS Dental (BDS) Ayush

2007-08 2010-11

Source: Medical Council of IndiaSource: Medical Council of India, Dental Council of India, National Health Prole, Central Council of Indian Medicine, Department of AYUSH

Source: Nursing Council of India

2007-08 2010-11

1,949

3,286

Nursing

2007-08 2010-11

30,290

40,485

MBBS

Synopsis of key facilitative changes made in the last few years

Medical colleges

Relaxation of norms to set up medical colleges

To encourage the establishment of medical colleges in the country, in line with current needs, the government has done the following:

Land requirement norm relaxed from 25 acres to 20 acres

In metropolitan and A-grade cities, the norm was reduced from 20 acres to 10 acres, provided that multistoried buildings have the required floor area as per MCI norms

In urban areas (non-metropolitan or A-grade city and population>25 lakhs, hilly areas and notified tribal areas, Northeastern states, hill states and union territories of Andaman and Nicobar Islands, Daman and Diu, Dadra, and Nagar Haveli and Lakshadweep), land can be in two pieces at a distance of not more than 10 km

Previously, only universities, state governments/UTs, autonomous bodies promoted by the central and state governments, registered societies; and religious and charitable trusts were permitted to open medical colleges; now, companies registered under the Companies Act are also allowed to establish medical colleges

Increase in intake capacity

The government has added seats through the following measures:

The ratio of teachers to students has been relaxed from 1:1 to 1:2 in post graduate colleges, resulting in increased capacity from 13,500 to 24,000

Maximum intake at MBBS level has been raised from 150 to 250

To bridge the shortfall in faculty, the ceiling on age limit for appointment of medical faculty has been raised from 65 to 70 years

Attract qualified practitioners from abroad

To add to the pool of qualified medical practitioners, the government has recognized the following for practice in India:

Postgraduate and graduate medical degrees of five English-speaking countries (the US, the UK, Canada, Australia and New Zealand)


Nursing institutions

Increase in intake capacity

The government has added seats through the following measures:

Student patient ratio has been relaxed from 1:5 to 1:3

To bridge the shortfall in nursing faculty, the government:

Relaxed norms for faculty of B.Sc. (N) program

Allowed sharing of faculty for diploma and graduate programs

Increased permissible faculty age up to 70 years

Strengthening of nursing councils The government strengthened state nursing councils @ INR1.00 cr per council

It strengthened nursing cells (Directorate of Health Services) at the state level @ INR1 cr per state/UT

New courses and paramedical education

Introduction of new courses To increase the availability of health care human resource, the government is planning to introduce

new courses. To strengthen primary health care, especially at the sub center level, the Ministry of Health and Family Welfare is planning to start a course, Bachelor of Rural Health

Standardization of paramedical education

To standardize paramedical education across the country, the government is setting up one National Institute of Paramedical Sciences (NIPS) in Delhi and eight Regional Institutes of Paramedical Sciences

For convergence and standardization of training programs:

Twelve health care and paramedic course curricula have been submitted to AICTE viz. Bachelor in Paramedical Technician (BPMT) in laboratory, blood transfusion, radiography, operation theatre, endoscopy, neurology, anesthesia and critical care, medical health records, emergency medical services, renal dialysis, cardiology and optometry

The 12 courses have been notified on the website of AICTE and are open to be taken up by industry and educational institutes. Educational institutes, i.e., schools, colleges, polytechnics, laboratories to scale up the number of trained technicians in the country

AffordabilityOver the last few years, the central and certain state governments have taken significant steps to secure vulnerable sections of the society from the potential financial burden imposed by expensive health care services.

Estimated coverage provided by state and the central government health schemes:

Health scheme Coverage of beneficiaries (cr)

Individuals Families

RSBY 7.9

Rajiv Aarogyasri (AP) 7.0 7

Chief Minister Health insurance scheme (TN)

- 1.35

Vajpayee Arogyasri Scheme (KN) 0.14

Yeshasvini (KN) 3.0

Comprehensive Health Insurance Scheme (Kerala)

0.19

Swarnajayanti mediclaim scheme (Goa)

0.03

Source: A Critical Assessment of the existing Health Insurance Models in India, PHFI, January 2011

Insurance coverage has increased by 12% in 2007 to an estimated 23%24%.Number of insured people (in cr)

0.5 0.43.35.6

10.0

21.9

2007 2010-11

Others

Source: Fostering quality health care for all, EY FICCI, 2008; IRDA data, accessed on 20th July 2012; A Critical Assessment of the existing Health Insurance Models in India, PHFI, January 2011

ESIS CGHS

13.7

28.3


While the increase in coverage is commendable, the scope of services covered by each of these schemes varies vastly. The RSBY scheme, for instance, largely covers identified secondary care procedures and medical conditions with only INR30,000 per annum cover per family on a floater basis.

Out-of-pocket expenditure (OoP) as a percentage of total health care expenditure in the last few years has reduced from 69% to 61%.

Out of pocket expenditure as a % of total health care expenditure

Source: Out-of-pocket health expenditure, World Bank website, accessed 1 August 2012

69%

61%

2004 2010

To reduce OoP expenditure, a majority of which is spent on drugs (~70%), the Government of India is contemplating providing free medicine to all.

In a policy aimed at benefitting the countrys 120 crore population, the union government is contemplating providing free generic medicines in all public health centers across the country. This scheme is yet to receive formal approval.

Assurance The Parliament has approved the Clinical Establishment Act, which requires clinical establishments to be mandatorily registered. The Clinical Registration Act, which provides for

mandatory registration of all clinical establishments, has been passed by the Parliament and implemented in a few states and all union territories. Other states are contemplating adopting the law by passing a resolution in the respective state legislature. The act aims to facilitate policy formulation and resource allocation, as well as to determine standards of treatment. It also focuses on creating an accurate database of such facilities operating in the country. The act will lay down standard treatment guidelines for common disease conditions. For this, a

core committee of experts has been formed. FICCI, as a nodal agency nominated by the Ministry of Health and Family Welfare, GOI, has coordinated the development of standard treatment guidelines for 20 disease specialties.

Hospital accreditations have significantly increased, reflecting an increased commitment to quality by both the purchasers and providers of health services. The number of NABH-accredited hospitals has increased

from 19 in 2008 to 137 across tier 1 and tier 2 cities

Another 470 hospitals had applied for NABH accreditation as on 15 July 2012

Besides, the number of JCI-accredited hospitals has increased from 10 in 2008 to 16 in 2012

While tier 2 cities have witnessed a significant increase in the number of NABH-accredited hospitals, almost 40% of these hospitals are part of chains, and the remaining are large setups. Smaller facilities find it difficult to obtain the accreditation as (a) they believe standards are overtly high and (b) the procedure is costly. While standards of quality should not be compromised to obtain accreditation, cost aspects need to be evaluated and appropriate steps have to be taken, so that more hospitals can equip themselves to deliver quality and get accredited. FICCI is also exploring a study in collaboration with NABH to study long-term costs and benefits associated with enhanced quality standards leading to accreditation.

Likewise, it is important to note that not many government hospitals have obtained NABH accreditation.

New NABH accreditations Total NABHaccreditations till date

2

13

0

30

5

59

1

26

Public Private2009 2010

Source: Joint Commission International, National Accreditation Board for Hospitals & Health care providers

2011 2012

90

47

Tier 1 Tier 2


The significant increase in the number of accredited hospitals is due to the market-driven approach adopted by the government to promote accreditation. In 2009, the GoI chose NABH accreditation as a

precondition for the empanelment of new hospitals under the CGHS scheme. In line with this, existing hospitals would need to apply for NABH accreditation. Differential CGHS rates for accredited and non-accredited hospitals make it lucrative for hospitals to obtain accreditation

In 2011, the Ministry of Tourism (MoT) announced incentives for NABH-accredited wellness centers and Ayurveda hospitals

In 2011, Ex-Servicemen Contributory Health Scheme (ECHS) announced plans to provide all its beneficiaries with quality medical care services and, hence, has prescribed that superspeciality hospitals empanelled under ECHS would have to obtain NABH accreditation within 18 months

In addition, the government has taken some steps to incentivize the creation of more hospital beds and to promote health care by offering tax exemption on preventive checkups.

In the 201213 budget, the government proposed to provide an investment linked deduction at 150% to hospitals under section 35 AD of the I-T Act. This covers building and operating a hospital anywhere in India with at least 100 beds. The amendment will take effect from 1 April 2013

To support PPP in health infrastructure, health care is now eligible for support without annuity provision under proviso to rule 3 (ii) of the scheme

To promote preventive care, a provision for deducting INR 5,000 on preventive health check up has been included under section 80D of the I-T Act. The amendment will take effect from 1 April 2013 and will accordingly apply in relation to the assessment year 201314 and subsequent assessment years

Also, health care services have been kept out of the service tax net


Chapter 2Financing UHC in India

Introduction As was highlighted in chapter 1, while there has been some progress in the health care sector, a lot still needs to be achieved.

The governments ultimate ambition is Universal Health Coverage (UHC), where all citizens have equitable access to key promotive, preventive, curative and rehabilitative health interventions at affordable costs.

Achieving UHC requires a fundamental remodeling in how health care is currently financed and in the roles of various stakeholders involved in service delivery.

This chapter aims to answer the following questions:

a. Universal health coverage: what is the case for India?

b. Basis UHC programs globally: what are the critical learnings that can be drawn for an emerging economy such as India?

c. What are the basic tenets and enablers for an effective UHC program?

d. What could be an appropriate level of spend as a % of GDP to ensure an effective and sustainable UHC?

e. What are the supply-side capacity and investment constraints that would need to be addressed?

f. What could be some important policy interventions to give fillip to private sector investments?

Section A: UHC case for IndiaWhat is UHC?UHC as a term has been widely discussed across various national and international forums over several decades. However, no single universally acceptable definition has been stipulated by any authority or agency.

In 2005, the WHO/World Health Assembly defined UHC as access to key promotive, preventive, curative and rehabilitative health interventions for all at an affordable cost, thereby achieving equity in access 24.

The High Level Expert Group, instituted by the Planning Commission of India in October 2010 for developing a framework on universal reach and access of quality health care services, defined UHC as ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services25.


While varying definitions continue to exist, the key tenets of any UHC delivery system are:

Universality in terms of coverage of entire population residing in a country irrespective of income level, occupation, religion, caste, gender, age group and geographic region.

Equity in terms of:

a. Access to quality services and benefits to all persons with similar health needs at an affordable cost such that the ability of people to use services is not limited

b. Financing the program such that households make contribution based on their ability to pay

Comprehensive range of services including promotive, preventive, curative and rehabilitative care

Assured quality of care to all through legal and regulatory frameworks that enforce adherence to standardized quality norms among providers

Respect for patient choice through freedom to select treatment options, provider options and doctors

Background: movement toward achieving UHCIn 1978, India committed to the Alma-Ata declaration, wherein health was declared as a fundamental human right and the attainment of the highest possible level of health as the key worldwide social goal. While the focus was on providing primary care, it was envisaged that governments would need to exercise the necessary political will to mobilize the required resources and use them rationally.

In May 2005, the World Health Assembly endorsed Resolution WHA58.331, urging member states to work toward universal coverage. It urged countries to:

Ensure that health financing systems include a method for prepayment of financial contributions for health care to allow sharing of risk among the population

Avoid huge health care expenditure and excessive burden on individuals seeking care

The implementation of UHC would require consideration of particular macroeconomic, socio-cultural and political context of each country.


How will UHC benefit India?Moral caseAbout 150 million people globally are estimated to suffer financial catastrophe each year, and 100 million are pushed into poverty because of direct payments for health services. Indians suffer a similar fate.

Nearly 12%15% of reported ailments are estimated to remain untreated, with the key reason being unaffordable cost26. Also, the number of ailments not being reported could be much higher, given that the sensitivity to ailments is also a function of propensity to avail health care.

To illustrate, if a states per capita GDP is considered as an indicator of propensity to pay for health care and IMR as a broad indicator of health consciousness, the number of people reporting ailments is almost four to five times in Kerala than that in Bihar (refer table below)27.

A similar trend is noticed in the proportion of households (per thousand households) reporting the availing of in-patient care in the last 365 days. In the case of the lowest decile and the highest decile of Monthly Per Capita Expenditure (MPCE) classes, the number of people reporting in-patient care in urban and rural areas increases by 2 and 3.5 times, respectively28. This indicates that people across MPCE classes possess varying ability to avail these services, and this might not necessarily be the desired extent. Further, 3% of Indias population is estimated to slip below poverty line because of health-related expenses.

Hospitalization rates

6188 79

95 95

133 131147

171

215

85108

122

Institutional Cases per 1000 households in one year

135145

155 149163

162 168

1 2 3 4 5 6 7 8 9 10

Rural

MPCE decile (1 being the lowest and 10 being the highest)

Source: Household Consumption of Various goods and services in India, NSS 66th round, NSSO, 2010

Urban

Urban Rural

States Per capita state net domestic product (INR) IMRPersons reporting

ailments IMRPersons reporting

ailments

Kerala 31,871 8 240 11 255

Bihar 7,914 50 63 62 53

India average 24,143 40 99 69 88


Cost of in-patient treatment due to single hospitalization case as % of annual per capita expenditure

133%

103%

89%

79%

74%

64%

56%

49%

41%

24% 30,200

17,644

5,436

7,013

8,104

9,130

9,692

11,332

12,755

14,647

1

2

3

4

5

6

7

8

9

10

RuralAnnual per capita expenditure (INR)

MPC

E c

lass

Source: Household consumption of various goods and services in India, NSS 66th Round, NSSO, 2009-10; EY Analysis

Cost of in-patient treatment due to single hospitalization case as % of annual per capita expenditure

180%

Source: Household consumption of various goods and services in India, NSS 66th Round, NSSO, 2009-10; EY Analysis

130%

107%

90%

77%

66%

56%

46%

35%

18% 70,359

36,608

7,191

9,972

12,142

14,353

16,776

19,601

23,171

27,958

1

2

3

4

5

6

7

8

9

10

UrbanAnnual per capita expenditure (INR)

MPC

E c

lass

UHC depends to a significant degree on social solidarity, given that any effective system of financial protection for the whole population relies on the readiness of the rich to subsidize the poor and of the healthy to provide for the sick29.

Economic caseEconomic benefits of a UHC system are estimated to be substantial. Some of these are:

Employment opportunities: UHC implementation would entail significant upgrade of health infrastructure. This development could potentially position the health care sector as the single-largest employer in the country, providing direct employment opportunities for almost 50 lakh people by 2022 (two-thirds of whom will be women)30. In addition, a number of indirect employment opportunities would be created in allied industries to support the expanded health care delivery.

Positive impact on peoples health: Empirical evidence from various studies suggests that better health may lead to increased income for an individual. It is argued that health leads to income growth through its effect on human capital accumulation and particularly through education provided that people have sufficient food and satisfactory educational opportunities31. Good health has many associated benefits including:

a. Children who are healthy and adequately nourished may spend more time at school and have a higher grasping and retaining power, thus enhancing their chances to earn more

b. The health status of adults affects human capital accumulation by their children. Parents play a guiding role for their children and mostly take decisions on behalf of the latter. Therefore, it is imperative that adults are hale and hearty and are able to fulfill all their responsibilities

c. A healthy population has a higher life expectancy, which means it works more and saves more

Impact on GDP: According to a WHO study, the estimated economic loss for India due to deaths caused by diseases in 2005 was 1.3% of GDP. With an increase in the number of non-communicable diseases, this loss is expected to increase to 5% of GDP by 2015

We believe that both the moral and economic cases for UHC are compelling enough for India to act. Both the government and the private sector need to cooperate to achieve this goal.

As the famous Princeton health economist Uwe Reinhardt put it, The issue of universal coverage is not a matter of economics. Few percentage of GDP assigned to health could cover all. It is a matter of soul.

Almost 80% to 90% of Indian households would report average cost of in-patient treatment to be almost half of their annual household expenditure, indicating the degree of financial hardship a single episode of in-patient treatment may cause.

Besides financial hardships, expenditure on health care causes emotional and physical suffering among people who are unable to obtain the required care levels for themselves or for their loved ones.

Any developed society should consider it a moral imperative to work toward reducing these hardships. Commitment to


Dimensions that the UHC program should address Any sustainable UHC program should address the following three aspects:

1. It should be viable for the provider

2. It should be sustainable for the payor

3. It should be designed to provide access to quality care to the patient

Sustainability Cost of care

1 2

3

UHC

Viability Financial Human resource for health care

Quality Threshold capabilities for eligible point of care Monitoring quality adherence

Financials To ensure quality health care for all and equity in access, the program must be financially viable for providers. Consequently, the following factors shall be important: Sufficiency of reimbursement rates to

hospitals Appropriate incentives to make investments

more attractive

Human resource for health care

Adequate strength of skilled human resource will be the key determinant of technical success of providers UHC should, therefore, include measures

to create/enable the creation of skill human resources in required numbers

Cost of care and disease burden/ incidence rates

It is imperative to maintain the cost of care at appropriate levels while reducing disease burden and incidence rates. Accordingly, the program needs to adequately focus on primary and preventive care to improve health standards and bring about a consequent reduction in hospitalization for secondary and tertiary care conditions.Also, standardization of treatment protocols and focus on generic drugs are likely to enhance cost efficiency for maintaining cost of care levels.

Integrity Appropriate measures should be put in place to minimize fraudulent claims and consequently reduce financial burden on payers.

1. Viability for providersEffectiveness of the proposed UHC depends on ensuring viability for providers in terms of:

2. Sustainability for payersThe UHC program needs to ensure sustainability for payer through ensuring right cost of care while reducing the overall disease burden and incidence rates, as well as minimizing the indiscriminate use of medical services to maintain integrity in provision of health care services.

3. Access to quality care for patientsEnsuring standardization of hospitality and clinical care is critical for ensuring the effectiveness of any universal health care delivery system. Consequently, this would require the formulation of associated regulatory and legal frameworks that require both public and private providers be equally responsible for maintaining standardization in the quality of care provided to people with similar health needs.

These quality care providers should ideally be located within acceptable distances. This will require making the requisite level of health care infrastructure available to provide an acceptable level of supply of health care services.


Section B: Relevant global experiences and imperatives for IndiaI. UHC has been at the vanguard of international policy agenda since many decades. As per International Labor Organization, nearly 50 countries had attained near-universal health coverage by 2008. Till recently, the US was the only industrialized nation that did not have some form of UHC (defined as a basic guarantee of health care to all its citizens). Interestingly, unlike the US, emerging economies are increasingly not buying the argument that health care is largely the responsibility of individuals and businesses, with a public provision relegated to the elderly, veterans and the indigent. Currently, there is a new wave of UHC, with many nations studying how to institute government-funded programs of health care. All large developing economies, China, India, Brazil and Indonesia have either taken steps or are actively considering moving toward UHC.

In many countries, there has been a strong ideological flavor to the reform process, which is aligned to economic growth and demographic changes and backed by a fervent political will. While relative intensities may vary, developed and developing countries face similar challenges and turn to common potential levers to address them.

Developed countries are grappling with spiraling per capita health spend and constrained supply infrastructure given the rapidly aging population, which contributes significantly to health care costs but only marginally to health financing. Developing countries are struggling to implement UHC and provide financial protection amid rising disease burden, sustained population growth in addition to financial constraints associated with health having to compete with other elements of social agenda.

International experience strongly suggests that there is no unified approach to delivering a successful UHC program. All countries need to make tradeoffs, particularly in the way pooled funds will be raised and utilized. Priorities need to be constantly revised in terms of from whom and how resources will be raised, on whom and for what will the resources be utilized and the proportion of total health care costs. This section encapsulates key learnings in UHC designs and implementation from a diverse set of countries across the developing economies of Asia, Africa, Latin America and the developed economies of Europe. A framework for assessing dimensions and challenges associated with design and implementation of UHC has been developed based on references from global literature. This will provide a broad overview of health financing tools, policies, trends with focus on current and anticipated challenges and potential levers being used to address them. Based on this, we have outlined imperatives for the design and implementation of the UHC system in India.


II. Evolution of UHC and prevalent models globally

Beginning of UHC across nations

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010 South Africa (NA)

China (90)Indonesia (46) Rwanda (92)Vietnam (42)

Thailand (98) Mexico (98)

Kenya (7)Philippines(83)Taiwan (100)Switzerland (100)South Korea (100)Brazil (100)

Italy (100)

Canada (100)

Sweden (100)

Chile (100)

UK (100)

Germany (100)

Japan (100)New Zealand (100)

Norway (100)

(): % of population covered latest available

Ghana (61)

Australia (100)France (100) Denmark (100)

Single payer Two tier Insurance mandated

Government provides insurance for all citizens and pays for identified health care expenses except for co-pay. Providers may be public, private or both

Government provides catastrophic or minimum insurance coverage for all residents (or citizens), while allowing the purchase of additional voluntary insurance

Government mandates that all citizens purchase insurance, whether private or public, which provides for costs of healthcare. In this system insurers are barred from rejecting sick and individuals are required to purchase insurance

Typical examples

UK Italy, Spain

Canada Norway, Sweden

Ghana, Kenya

Taiwan

Thailand

South Korea

Typical examples

France Denmark

Singapore

Philippines, Korea, Vietnam, Malaysia, China

Typical examples

Switzerland

Germany

Japan Australia

Austria

Netherlands

Typical UHC models

* The dates given are estimates, as universal health care arrived gradually in many countries. Typically, the date provided is the date of passage or enactment for a national health care act mandating insurance or establishment of UHC.

Source: European Observatory on Health Systems and Policies, World Health Organization Europe website, http://www.euro.who.int/en/who-we-are/partners/observatory/health-systems-in-transition-hit-series/countries, accessed 1 August 2012; Countries, Joint learning network for UHC website, www.jointlearningnetwork.org/countries, accessed 1 August 2012; Tetsuo Fukawa, Public Health Insurance in Japan, World Bank working paper, 2002. Toni Ashton, Healthcare Systems in Transition, Journal of Public Health Medicine, 1996.


III. 5P Framework to draw learnings from global UHC systems

Enablers:

1. Quality oversight (standard treatment guidelines, checklist-based reimbursements, monitoring, audit)

2. Electronic health records that are interoperable across provider groups

3. Role of non-traditional stakeholders in aiding health delivery (e.g., IT, mobile phone companies, micro credit, etc.)

4. Cost control regulations (e.g., price controls on drugs)

The above framework is proposed as a tool to aid a descriptive, high-level analysis of the existing and proposed situation in a countrys health system with respect to health care financing and imperatives for the design and implementation of a UHC system for India. Countries analyzed in the sample study are:

Note: Not all the above countries have been assessed across each dimension. Only key examples that align to the Indian context have been provided.

Asia China, Taiwan, Thailand, Malaysia, Indonesia, Sri Lanka, the Philippines, South Korea

Latin America Brazil, Chile, Mexico

Africa Ghana, Kenya, Rwanda, South Africa Europe and other developed markets

France, Germany, Canada, Switzerland, Denmark, Japan, US, Norway, Sweden, UK

Target 100% coverage with minimal out-of-pocket expenditure

Target beneficiaries

Target coverage services

Method of extending coverage (broad then deep, deep then broad)

Target proportion of costs to be met

Quantum

Public spend as a % of GDP

Sources of financing

General taxes vs. premium contribution

Sector specific/sin taxes

Copayments and supplementary insurance

Methods of redistribution of collected funds between high- and low-risk individuals (risk subsidy), high- and low-income segments (income subsidy)

Types of pool: single vs. multiple pool

Choice of purchasing model (direct by government, contract in services)

Empanelment of providers and reimbursement models

Provision of supply-side financing incentives to promote private sector health care investment

Efficiency incentivization on provider and beneficiary front

Degree of standardization and quality of care

Raising of sufficient and sustainable revenues from payers efficiently and equitably

Consolidation of raised funds at a national level to facilitate equitable allocation to states as per respective needs, irrespective of contribution to funds raised

Transfer pooled resources to service providers on behalf of the covered population

Ensure quality and adequacy of health care delivery with minimum waste of resources

Plan Pay Pool Purchase Provide


The planning process deliberates on the means and processes to be adopted to achieve universal population coverage for basic health care services with minimum OoP expenditure.

Current Indian context:

No scheme currently to cover the entire population

Specific schemes for targeted population

Population with some form of insurance coverage: ~23% (300 million people)32: coverage mainly extended to the formal sector, government employees and BPL families with varying levels of service coverage

Insurance scheme Maternity Preventive and wellness

OP IP

RSBY/Aarogyasri x x

Private Insurance x x x

Publicly funded financing models (except CGHS) provide limited hospitalization cover in terms of benefit packages (e.g., only up to INR30,000 for a family in case of RSBY33) and mainly cater to secondary care (RSBY) and tertiary care hospitalizations (Aarogyasri)

Out-patient expenditure currently is not covered under public/private financing schemes

Inequity in private insurance coverage with pre-existing ailments not covered and elderly excluded in most cases given that premium advances with age or morbidities

High OoP expenditure in India: ~61% of the total health care spend (15th highest among all countries)34

Decrease in utilization of public health facilities, primarily due to suboptimal level of health care provision leading to higher OoP expenditure

High incurrence of catastrophic expenses: ~3% of the population falls under the poverty limit every year in India due to high OoP expenditure35

This has manifested in highly skewed access to health care across the country: hospitalization rate for the highest MPCE class is ~5%, while it is ~2.4%36 for the middle MPCE class

Plan

Steps taken by other countries targeting UHC Learnings for India

Trilateral coverage:

(1) Population (breadth):

Countries that have adopted UHC have targeted 100% coverage; however, actual extent varies

Most developed nations: ~100%37 Developing nations38

Thailand, Brazil, Mexico and Malaysia: ~100%

Indonesia, Vietnam and the Philippines: 5075%

By virtue of UHC, the financing program should cover 100% of the population

Coverage has to be made mandatory and should not restricted to certain population groups


Population coverage or service coverage?

Population(Breadth)

Followed by

Mexico, China, Chile, Ghana, Brazil

Korea, Taiwan, Thailand

Followed byServices(Depth)

Basic health packages covering both in-patient and out-patient care with well-defined exclusions to be defined by an independent agency (on the lines of NABH which is an autonomous body on Quality and accreditation in the country)

Uniform entitlement across patient groups

Plan for coverage should be spread across the next 510 years

For India, given its high portion of population in the informal sector, the breadth first, depth later approach seems appropriate.

20%-30% of expenditure to be met OoP (i.e. copayments/user fees, voluntary health insurance)

It takes ~510 years for high-population countries to achieve ~100% coverage.

Chinas rural population coverage increased from 3% to 90% in five years (driven by high premium subsidies in voluntary schemes such as NCMS)39

Coverage of low-income rural population in Mexico increased from 14% in 2005 to >90% in 2009, driven by the Seguro Popular program that focused on providing targeted and highly subsidized public health care to the poor40

Coverage has been mainly driven by mandatory enrolment in the formal sector (in developed and developing nations such as China, Thailand and the Philippines) or high premium subsidies to accelerate enrollment in the informal sector (in China, Thailand, the Philippines and Indonesia)


(2) Services (depth):

Developed nations have covered the majority of services, while developing nations are gradually adding to the suite

Basic health care is included everywhere with the exception of high cost or esoteric treatments (transplants, cosmetic surgery, etc). Key exclusions:

Thailand: organ transplants, IVF, cosmetic surgery

Indonesia: organ transplants, dental prosthetics

The Netherlands, the UK, Canada, Sweden: dental, eye care

(3) Proportion of OoP spend (height):

Most countries are targeting OoP spend of not more than 20%-30% in the short term and 15%20% in the long term

OoP expenditure (as a % of total expenditure on health) of developing nations is typically ~34 times that of developed nations (2010):

7 to 13%: France, Germany, the UK41 27 to 47%: China, Brazil, Mexico, Ghana, Kenya42

China has committed to reduce OoP expenditure from 36% to 30% by 201543


The pay process entails raising funds efficiently and equitably to finance the UHC program. UHC typically relies on public sources, i.e., general or specific taxation, compulsory or voluntary payroll contributions, direct out of pocket payments such as user fees or copayments.

Current Indian context: Low public expenditure on health impacts the sufficiency of funds as follows:

Public expenditure on health is 1.2% of GDP, which is lower than that in China (2.7%) and Brazil (4.2%)44

Low priority by the government: ~4% of the fiscal capacity is allocated to health (only 9 countries out of the 191 covered report a lower number)45

India has a higher employment rate in the informal sector than the corresponding figure for Brazil and China. This is a challenge and context that needs to be recognized in method of fund raising

Informal sector (as a % of total population)46

Brazil and China Developed nations India

50% to 70%


Means of prepayment Adopting nations

Fund collection via national budgets, which consists of government revenues, mainly from direct/indirect taxes

Most of the developed nations

Thailand, Indonesia, Malaysia and Sri Lanka in Asia

Premium collection via mandatory payroll tax on the formal sector, coupled with voluntary risk-rated or flat premiums for the informal sector

Developing nations

The Philippines, China, Korea

Brazil, Mexico, Chile

A few developed nations including Switzerland, France and Germany

Fund requirement varies depending on coverage and rollout plan for UHC.

The WHO recommends per capita health care spend of USD 6065 in low-middle income countries or health expenditure of 4%5% of GDP to finance a basic health care package for 100% of the population48

Countries that have adopted UHC allocate more to health (60%80% of health care financed by the government)

Countries in Africa have committed to spend at least 15% of their fiscal budgets on health care provision49

China committed to raise health care spend as a % of GDP by 0.8% from 2.3% in 2008: ~USD 120 billion reform package between 2009 and 201250


Method of raising funds

(1) Prepayment via general tax/premiums

Prepayment has proved to be an effective method for sufficient fund collection in countries on the path of implementing UHC. Nations adopt two means of prepayment:

Universality is the fundamental tenet of a UHC financing mechanism irrespective of the prepayment method.

General taxation: Universality is inherent, as taxes are based on income and consumption

Premiums:

The poor pay less premiums or are exempted (Mexico, China, the Philippines).

The rich pay

I. Payroll-based (most developed nations) premiums if they belong to the formal sector or

II. Income-based premiums (South Korea) or fixed premiums (the Philippines, China) if they belong to the informal sector

Health is a state subject and health risks, political will and economic ability to contribute toward pr

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