A case for reforming private health care - Hindustan Times
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A case for reforming private health care

ByK Srinath Reddy
Mar 11, 2024 10:09 PM IST

The government must undertake a credible process of cost estimation, ensure the adoption of standard guidelines for treatment, and monitor adherence

The National Health Policy (2017) envisages “universal access to good quality health care services without anyone having to face financial hardship as a result”. This goal is a clear affirmation of the commitment to universal health coverage (UHC). The policy also recognises “the pivotal importance of Sustainable Development Goals”. These list UHC as target 3.8, to be achieved by 2030.

India’s mixed health system evolved by default and not by design. (REPRESENTATIVE PHOTO) PREMIUM
India’s mixed health system evolved by default and not by design. (REPRESENTATIVE PHOTO)

Two measured indicators of UHC are the degree of financial protection afforded to persons utilising needed health services, and the extent of health service provision to the population. The former is assessed by measuring and monitoring out-of-pocket expenditure (OOPE), catastrophic health expenditure, and the proportion of people made poor because of expenditure incurred on needed health care. The service coverage index is computed by combining tracer indicators across four domains: Reproductive, maternal, newborn and child health; infectious diseases; non-communicable diseases (NCDs); and service capacity and access. Adequate service coverage is essential to correctly estimate OOPE since the non-availability of accessible, affordable and quality health services can lead to people not seeking needed care. Such foregone care results in spuriously low estimates of out-of-pocket and catastrophic health expenditures, giving a rosy picture of financial protection.

India is attempting to improve performance on both these indicators. Comprehensive primary care, through Health and Wellness Centres, strengthening of district and medical college hospitals, and establishment of regional AIIMS are initiatives for improving service provision by the public sector. Much of this care is provided free of cost. However, existing public sector capacity is substantially supplemented by private sector hospitals. Extending service coverage can undermine the principle of financial protection which is cardinal to UHC. Claims about quality of care are contested, with considerable variability across both public and private hospitals.

India’s mixed health system evolved by default and not by design. Public sector health services were the main vehicle for the delivery of organised health services in the early decades after Independence. They dwindled in number and decayed in quality in many parts of the country, due to low levels of public financing and poor governance. Over time, the private sector grew in presence and influence, building financial muscle through investments that flowed in after liberalisation and globalisation opened the Indian economy. Tertiary care provision in urban areas is now dominated by the private sector.

Both central and state governments are engaging private sector hospitals to supplement public sector provision of services in secondary and tertiary health care. This is done through central and state health insurance schemes, which purchase services from private hospitals. Several large employers also do so, through health insurance coverage for their employees. Some individuals buy private health insurance while others pay from their pocket for health services. Even insured individuals may have to pay for costs extending beyond the insurance coverage (co-payment).

It is rational to use all existing health care resources in society to advance the objectives of UHC. However, that requires a robust regulatory framework wherein all health care delivery institutions deliver appropriate care, through quality-assured services, at an affordable cost. The government has to be the guarantor of UHC to the whole population, even if it is not the sole service provider or the purchaser of services.

In this context, a recent judgment by the Supreme Court has stirred discussion on the duty of the Indian government to fix charges that can be reasonably levied by private hospitals. It came against the backdrop of considerable public discontent on the high costs charged by some private hospitals, even during the pandemic. The Court expressed concern that the government had not utilised the provisions of the Clinical Establishments Act and said that, if the government did not act, it would fix the charges at the rates paid by the Central Government Health Scheme (CGHS) for services provided to its beneficiaries by private hospitals.

The public and sections of the health insurance industry have welcomed the judgment, but the private health care industry has raised concerns. While agreeing with the spirit behind the judgment, it called for a “scientific method” of cost estimation—according to the type of health care provided (primary, secondary or tertiary), and location (rural, tier-2 or urban). Spokespersons of private hospitals call for “range pricing”, based on these assessments and factoring in the high investments made by private hospitals on land, infrastructure, skilled personnel and state-of-the-art equipment. They argue that qualified cost accountants should be part of committees that estimate costs across public and private health care institutions. Such an exercise was undertaken in Karnataka in 2017. Claiming that CGHS beneficiaries who avail private hospital services are cross-subsidised by payments from private patients, they warn that the imposition of unviable charges would threaten the survival and scalability of private sector health services. Critics point out that private hospitals have benefited from concessions in land pricing, low or exempt customs duties on equipment, and recruitment of doctors, nurses and technicians trained in publicly funded institutions.

The government must undertake a credible process of cost estimation and price fixation, weighing all of these factors. Whether the patient pays directly or an insurance scheme pays, inflated costs hurt UHC. The government must ensure the development and adoption of standard management guidelines (for diagnostic tests and treatment protocols), monitoring their adherence to regular health care practice through periodic technical audits. Through such methods, it has to curb the pernicious practice of performing unnecessary tests or treatment procedures to boost hospital revenues.

K Srinath Reddy is distinguished professor of Public Health, PHFI. The views expressed are personal

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