The burden of health care on India’s poorest
Indian government efforts have reduced out-of-pocket health expenditure from 74% in 2001 to 50% in 2021, but inefficiencies persist, especially for the poor.
In recent years, the Indian government has made significant strides in reducing the burden of health expenditure on the common citizen. According to the World Health Organisation (WHO), out-of-pocket-expenditure shrunk from about 74% of total health expenditure in 2001 to about 50% of total health expenditure in 2021. A particular focus of the government has been to reduce the burden of severe economic shocks due to “catastrophic” health care expenditure such as hospitalisation. In 2018, the government introduced the Pradhan Mantri Jan Arogya Yojana (PM-JAY), popularly known as Ayushman Bharat, which provides Rs. 5 lakh cover upon admission into an empaneled hospital for about 500 million Indians. In the interim, several states such as Andhra Pradesh and West Bengal designed government schemes with similar features with different levels of cover and effectiveness in the population.
Yet, anecdotal evidence suggests some inefficiencies in the functioning of schemes such as PM-JAY. A person must be admitted into a hospital to receive the benefit, but a number of hospital procedures need not require admission and still generate exorbitant health costs. Also, the scheme design is “reactive” in that it does not encourage investment in preventative health care from the citizen or the provider. Furthermore, hospitals may be wary of encouraging patients to avail of PM-JAY or similar schemes, or may not be incentivised to provide high-quality health care, if they perceive the reimbursements under the scheme to be insufficient and lacking in promptness as compared to private insurance schemes. Without structuring incentives properly, there is a concern that such measures may fail to properly reach the intended target population — the poor most in need of health expenditure assistance — and oblige citizens to fall back on out-of-pocket health expenditure.
In order to understand the character of catastrophic health expenditure, Artha Global’s Centre for Rapid Insights (CRI) asked respondents, “The last time you or someone in your household was hospitalised/admitted in a hospital, what was your primary mode of payment?” The sample covered 6,755 respondents across 421 of India’s 543 parliamentary constituencies, and anchored to population weights calculated from the National Family and Health Survey (NFHS) conducted from 2019 to 2021, to generate estimates relatively representative of India as a whole.
Overall, we found that a little over a quarter of households in the population (29%) avail of some kind of government scheme to cover catastrophic health expenditure. Even with significant growth in government assistance, we found a little over one-half of the population (53%) still required out-of-pocket catastrophic health care expenditure, which naturally puts a huge burden on the population at large. A smaller, but significant, share of the population pay their expenditure through either employer or private insurance (18%). This data is relatively consistent with previous estimates from Indian data such as the National Sample Survey and suggests that government schemes still fail to meet health care demand to a great extent. Indeed, there is a concern that health care demand is less elastic than other expenditure — meaning that citizens may be more willing to pay out of pocket if the government procedure is time-consuming and onerous or if the quality of health care provision is uncertain.
When we further break down the data by economic well-being, the problems become clearer. The poorest in our population, those who do not own a vehicle, are much more likely to pay out-of-pocket (60%) than those who own a scooter/bike (48%) or car (40%). At the same time, the proportion of those availing of a government scheme remains relatively similar across all economic classes (the lesser out-of-pocket expenditure for more well-off populations is due to greater private and employer insurance coverage). Two key points emerge from this analysis. First, the market inefficiencies identified above have pernicious effects in obliging citizens to pay health expenses out of pocket, and are only likely to be mitigated if citizens have access to another source (private or employer) of insurance. Second, the relatively universal nature of government schemes combined with market inefficiencies generate a regressive structure in which the target population (the poor who are most in need) are precisely those who are the least protected.
The government has taken the first steps in reducing out-of-pocket health expenditure across the population. But it is now time to structure schemes and incentives for health care providers to reach those most in need of assistance. As India seeks to boost productivity and economic growth, engendering a healthier and happier population at a lower cost will be critical.
This is the latest instalment in a new series that uses insights from rapid polling across the country on topical issues. The polls are run by the Artha Global’s Centre for Rapid Insights (CRI). Neelanjan Sircar is its director.