FICCI EY Report Healthcare Report

Universal health cover for India Demystifying Demy stifying nancing needs August 2012

Foreword Ms Sangita Reddy Chairperson

FICCI Health Services Committee, and ED (Operations), Apollo Hospitals Group

Universal Health Coverage (UHC) has been renewed on the global agenda given the reafrmation of World Health Organization’s 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 nancing of health to 2.5% of India’s 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 lling. However, looking at the scal decit 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 signicant 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 nancing 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 nancing, 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, system, an invigorated 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 inuencing 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 oint study study by by FICCI FICCI and Ernst Ernst & Young Pvt Ltd Ltd evalua evaluates tes the progre progress ss of the the healt health h sector sector in India India from 2008 to 2011, evaluates the international experience of universal health coverage programs, identies lessons for India, studies demand- and supply-side nancing 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: 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.

Foreword Ms Sangita Reddy Chairperson

FICCI Health Services Committee, and ED (Operations), Apollo Hospitals Group

Universal Health Coverage (UHC) has been renewed on the global agenda given the reafrmation of World Health Organization’s 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 nancing of health to 2.5% of India’s 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 lling. However, looking at the scal decit 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 signicant 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 nancing 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 nancing, 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, system, an invigorated 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 inuencing 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 oint study study by by FICCI FICCI and Ernst Ernst & Young Pvt Ltd Ltd evalua evaluates tes the progre progress ss of the the healt health h sector sector in India India from 2008 to 2011, evaluates the international experience of universal health coverage programs, identies lessons for India, studies demand- and supply-side nancing 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: 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.

Hitesh Sharma Partner Ernst & Young Pvt Ltd

Muralidharan M Nair Partner Ernst & Young Pvt Ltd

Aashish Kasad Partner Ernst & Young Pvt Ltd

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 nancing needs and potential incentives to generate appropriate quantum of funds with the required velocity of fund ow 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 efciency 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 signicant 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 justied, 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 afliations. 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 nancing 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 dene the context of possible health care demand, role of the government and private sector, nancing 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.

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, sociocultural and political context of each country.

Case for UHC Health 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 nd average cost of in-patient treatment to be almost half of their annual household expenditure 1, indicating a high degree of nancial hardship. It is estimated that 3% of India’s population slips below poverty line each year because of health-related expenses2. Utilization of health care services depends on affordability: According to the NSSO’s 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. Signicant 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 health 5.

In any given developed society, it is the government’s 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 benets of UHC may not be quantiable, the benets 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 India Whether the provision of UHC impacts nancial sustainability of a nation’s health care system has been frequently discussed in health policy debates. The challenge of nancing 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 efciency 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) dene 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.

Universal health cover for India: demystifying nancing needs

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 government 8.

Framework for nancing UHC in India Equity and efficiency of delivery

Equity and efficiency of funding

5 Provide g n i c n a n fi e d i s d n a m e D

Efficiencies

2 Pay

Enablers s l a u d i v i d n I

3

1 Plan

Pool

Capital

►

Quality oversight

►

Technology for access and governance

►

4 Purchase ►

Focus on preventive care aided by social determinants of health

s r e d i v o r P

Cost control regulations on inputs

Allocative Technical

g n i c n a n fi e d i s y l p p u S

Dynamic

Guiding principles Universality Coverage of entire population irrespective of income level, occupation, religion, caste, gender, age group, geographic region

Equity in access to quality care

Comprehensiveness in services

Assured quality of care

Respect for patient choice

At an affordable cost as well as equity in financing the program such that households contribute based on ability to pay

Inclusion of preventive and promotive care apart from curative and rehabilitative care

To all through legal and regulatory frameworks that enforce adherence to standardized quality norms among providers

Freedom to select between treatment options, provider options and doctors

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


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-dened basic health package.

•

OoP expenditures hould not exceed 20%–30% of the total health expenditure, i.e., mainly copayments, for availing excluded services/higher hospitality care.

•

Health is a state subject and health risks, political will and economic ability of providing health care vary signicantly across states. To truly universalize health care, “ pooling of political will” is required to align and unify UHC’s 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 nancing the program). Alternative modes of raising funds (e.g., sin taxes, sector-specic 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 specic groups, viz., below poverty line (BPL) families. Gradually, copayments can be phased out with the maturing of primary care and triaging models.

•

States have varying levels of income and risk prole. For effective nancing 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.

•

Health care should be purchased by insurance agencies that may or may not be state specic 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 efciency rather than fee for service model that only incentivizes revenue generation.

•

A rationalized tariff xing policy should be adopted that denes differential reimbursement rates for stratied provider groups based on technical and nancial criteria.

•

The private sector’s involvement should be encouraged in specic focus areas to complement public health care provision through targeted supply-side nancing to aid infrastructure generation, its equitable distribution and efcient delivery of health care services to make UHC effective and sustainable.

•

A robust governance mechanism should be instituted for:

Pay Raise sufcient and sustainable revenues from payers, efciently and equitably

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

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

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

•

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

•

Tariff xation 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 efciencies 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 efciencies and effectiveness.


Critical success factors for an effective and sustainable UHC

b.

The 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. Quartile of PHC usage

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 India 9. •

The country has a huge under-nourished population of ~38 cr and an even higher proportion of “calorie sufcient but nutrition decient 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 India’s disease burden11. The ‘0–36’ months age group is the window of opportunity to establish the foundation for good health, after which many of the deciencies are set for life. However, most child nutrition programs focus on subsequent age groups.

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.

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 scal burden of nancing 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.

•

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


Human infrastructure

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 signicant 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

Doctor density per 1,000

Key states

Focus

0.3–0.4

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

High

0.4–0.6

Madhya Pradesh, Kerala, Uttar Pradesh, Tamil Nadu

High-medium

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 efciencies, 1.7 beds per 1,000 population would sufce. The required number can still be lowered provided adequate focus is on: i.

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

•

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 efciencies 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

P M

0.46

0.51

0.54

0.55

0.59

a s s i r O

r a h i B

a n a y r a H

K & J

P U

0.71

0.8

0.86

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 dispensaries 16) in health care delivery. This would include focus on the following: •

m a s s A

n a h t s a j a R

a i d n I

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.

iii. Promoting day care/short stay centers •

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.

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, noncommunicable disease programs: National Program for Prevention and Control of Cancer,

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


Tamil Nadu Government’s 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.

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

•

c.

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 identied 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.

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 country’s 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 denes differential rates for stratied 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 efciency and outcomes (such as DRGlinked payments, xed 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 efcient system.

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

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 signicant role in ensuring timely access to quality health care. 3.

Ensuring strong focus on cost of care: To ensure that the nancial 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

4.

Enabling governance: An effective and efcient UHC regime demands optimal health system governance that ensures transparency, denes 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.

b.

5.

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-specic differentials. The state governments should augment centrally raised funds with state-specic nancing, as well as implement and roll out these funds with well-dened rules of engagement and accountability between the center and the state. 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 efcient transaction processing, monitoring compliance with treatment protocols, monitoring contractual compliance, collecting basic health and epidemiological data and ensuring clinical governance. This presumes unique identication assigned to each citizen.

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 nancing

to deliver on the critical success factors for UHC While it can be argued that with the government nancing the demand side, supply-side incentives should be avoided or minimized in UHC, increasing the efciency of the health system would require targeted supply-side nancing to: •

Initiate and calibrate the required velocity for infrastructural capacity generation and distribution through capital efciency.

•

Enhance output of the health system by channelizing investments toward components wherein marginal cost of producing health care is less than the margin benet derived through allocative efciency.

•

Minimize cost of inputs for a given level of quality output through technical efciency.

•

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

H – High, M – Moderate, L- Low Critical success factors for UHC

Role of public and private Public

Rationale for incentivizing private sector participation

Recommendations on supply-side nancing

for the private sector

Private

1. Focus on health outcomes a. 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 lling 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 prots and gains derived

from business of operating and maintaining primary health care chains operating beyond Tier 2 townst o 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


Critical success factors for UHC





Private

2. Taking care to where the patient is a. Address inequity in the distribution of physical infrastructure (hospital

M

H

•

beds) •

Signicant investment requirements – INR2.49 lac cr for additional 11.4 lac beds in focus states21

•

— 100% deduction of prots 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:

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 nancing the demand side •

Healthcare to be accorded infrastructure status

There would be a need to rationalize capital expenditure and enhance capital efciency as: a) reimbursements under UHC would be rationalized, potentially earning lower revenues per

•

Any location in specied 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

patient and b) health care

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

investments have a long gestation with payback period of ve to seven years

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 fundingb y 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 nancially attractive in tier 2 and below locations

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

•

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

•

Reduction of import dutyo n medical equipment

•

PPP arrangementss uch 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)

sector can participate within

a well-dened framework to ensure transparency and merit in admission and quality of education.


Critical success factors for UHC


c. Technology-enabled

M




Private H

•

health care

Since the creation of new infrastructure and the addition of specialists will take time,

•

f approved expenditure 250% deductiono 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 browneld expansion at any time

there will be need for private

interventions that promote access within constraints of

current resources (physical and human). 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)

M

H

•

Adoption of technology will be a

•

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

•

Penaltiesf or not sharing outcome/ epidemiological data with the government

•

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

4. Enabling governance

Technology for transparency and advancement of care

critical enabler for governance

imperatives and also for efcient and effective delivery of care. Given the benets in the longer term, propensity to invest could be low among providers. •

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

•

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.

5. Building CoE

Advancement of care

H

L


Chapter 1: Health care scenario – an update

2

Chapter 2: Financing UHC in India Section A: Case for UHC Section B: Relevant global experiences and imperatives for India

10 15

Section C: Demand model and nancing requirements for UHC

33

Annexures

46

Contents Universal health cover for India: demystifying nancing needs

1

Chapter 1 Health care scenario — an update The size of the health care sector grew rapidly from US$22bn during 2004–05 to US$60bn during 2011–1222. 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.

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.

Life expectancy at birth (years)

Infant mortality rate (per 1000 population)

59

63

65.4

146 110

50

80 32

1950-51

56

1980-81

1990-91

2005

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

2

2011

1950-51

1980-81

1990-91

2005

47

2010

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


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

Key issues

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

Affordability (to what degree is health care affordable?) Assurance (what are the measures being taken to assure patients on quality of care being delivered?)

•

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)

•

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

•

Low penetration of insurance (12%)

•

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


3

While these issues still exist, the government’s efforts have brought about respite to varying extents. Aspect

Recommendations

Progress

Increase physical health infrastructure (beds from 0.86–2/1,000 by 2025) Access

Enhance access to health care services and bridge inequity among states Facilitate changes to enhance availability of qualied clinicians

Affordability

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

Assurance

•

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 dened parameters related to health care outcomes

Medium

High

Low

Access Rural health infrastructure has been signicantly strengthened, enhancing accessibility to health

care services for the rural population While the number of public health care facilities marginally increased between 2007 and 2011, the capability of such setups was stepped up signicantly. 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

1,48,124

4,809 23,887

1,45,272

4,045

22,370

Sub-centres

Primary Health Centres 2007

Community Health Centres

2011

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

4


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

7,793

35%

207,868

153,568 6.2 times

3,985

45%

4 times 1,263

44,936

980

PHC

CHC 2005

Health worker /ANM at sub-centres & PHCs

2011

2008

Specialists and pharmacists

65,344

Nursing staff at PHCs and CHCs 2011

Radiographers and technicians 18%

24,671

26%

20,956

16,208 12,886 62%

31%

6,935

4,279

1,695 2,221

Total specialists at CHCs 2008

Pharmacists at PHCs and CHCs

Radiographers at CHCs

2011

2008

Lab technicians at PHCs and CHCs 2011

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

Human resources in the health care domain Shortage 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 rst 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.


5

Number of colleges

Number of admissions 40,485

3,286 477

508 30,290 1,949

266

314 267

MBBS

289

Dental (BDS) 2007-08

Ayush

2010-11

Source: Medical Council of India, Dental Council of India, National Health Profile,

Nursing

2007-08

2010-11

Source: Nursing Council of India

MBBS 2007-08

2010-11

Source: Medical Council of India

Central Council of Indian Medicine, Department of AYUSH

Synopsis of key facilitative changes made in the last few years Medical colleges

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

Relaxation of norms to set up medical colleges

•

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 oor area as per MCI norms

•

In urban areas (non-metropolitan or A-grade city and population>25 lakhs, hilly areas and notied 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

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

Increase in intake capacity

Attract qualied practitioners from abroad

6

To add to the pool of qualied medical practitioners, the government has recognized the following for practice in India: •

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


Nursing institutions

The government has added seats through the following measures:

Increase in intake capacity

Strengthening of nursing councils

•

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

•

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 •

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

•

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

Introduction of new courses

For convergence and standardization of training programs: Standardization of paramedical education

•

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 notied 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

Affordability Over the last few years, the central and certain state governments have taken signicant steps to secure vulnerable sections of the society from the potential nancial burden imposed by expensive health care services.

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

Coverage of beneciaries (cr)

Insurance coverage has increased by 12% in 2007 to an estimated 23%–24%.

RSBY

7.9

Number of insured people (in cr)

Rajiv Aarogyasri (AP)

7.0

7

-

1.35

Chief Minister Health insurance scheme (TN)

28.3

21.9

13.7 10.0

5.6

3.3 0.5 2007 Others

0.4

2010-11 ESIS

Individuals

Vajpayee Arogyasri Scheme (KN)

0.14

Yeshasvini (KN)

3.0

Families

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

CGHS

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


7

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 identied secondary care procedures and medical conditions with only INR30,000 per annum cover per family on a oater 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 69%

61%

2004

2010

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

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 benetting the country’s 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.

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

8

Hospital accreditations have signicantly increased, reecting 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 signicant 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 nd it difcult 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 benets associated with enhanced quality standards leading to accreditation. Likewise, it is important to note that not many government hospitals have obtained NABH accreditation.

Assurance

•

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.

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

New NABH accreditations

Total NABH accreditations till date

59

30

90

47

26

13 2 0

5

1

Public 2009

2010

Private 2011

Tier 1

Tier 2

2012

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


The signicant increase in the number of

accredited hospitals is due to the market-driven approach adopted by the government to promote accreditation. •

•

•

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 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 the 2012–13 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

•

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

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

•

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

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 2013–14 and subsequent assessment years

•

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


9

Chapter 2 Financing UHC in India

Introduction

Section A: UHC – case for India

As was highlighted in chapter 1, while there has been some

What is UHC?

progress in the health care sector, a lot still needs to

be achieved. The government’s 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 nanced 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 llip to private sector investments?

10

UHC as a term has been widely discussed across various national and international forums over several decades. However, no single universally acceptable denition has been stipulated by any authority or agency. In 2005, the WHO/World Health Assembly dened 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, dened 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 services 25.”


While varying denitions continue to exist, the key tenets of any UHC delivery system are: •

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

•

Equity Equityi n terms of: a.

Access to quality services and benets 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 UHC In 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 nancing systems include a method for prepayment of nancial 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.


11

How will UHC benet India? Moral case About 150 million people globally are estimated to suffer nancial 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 cost 26. 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 state’s 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 ve times in Kerala than that in Bihar (refer table below)27.

Urban

Rural

Per capita state net domestic product (INR)

IMR

Persons reporting ailments

IMR

Persons reporting ailments

Kerala

31,871

8

240

11

255

Bihar

7,914

50

63

62

53

India average

24,143

40

99

69

88

States

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, respectively 28. 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 India’s population is estimated to slip below poverty line because of health-related expenses.

Hospitalization rates Institutional Cases per 1000 households in one year 135 122 108

215 145

85 88

79

2

3

155

149

133 131

95

95

4

5

163 147

162

168

171

61 1

Rural

6

7

8

9

10 10

Urban

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

12


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 nancial hardship a single episode of in-patient treatment may cause.

UHC depends to a signicant degree on social solidarity, given that any effective system of nancial protection for the whole population relies on the readiness of the rich to subsidize the poor and of the healthy to provide for the sick 29.

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

Economic case

Annual per capita expenditure (INR)

Urban 10

18%

8 s s a l c E C P M

Employment opportunities: opportunities: UHC implementation implementation would entail signicant 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 people’s health: 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 sufcient food and satisfactory educational opportunities31. Good health has many associated benets including:

36,608

46%

27,958

56%

7

•

70,359

35%

9

Economic benets of a UHC system are estimated to be substantial. Some of these are:

23,171

66%

6 5

19,601

77%

16,776

90%

4

14,353

107%

3 2

12,142 9,972

130% 180%

1

7,191

Source: Household consumption of various goods and services in India, NSS 66th 66th Round Round NSSO NSSO 2009-1 2009-10 0 EY Anal Anal sis

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

9 8 s s a l c E C P M

7 6 5 4 3 2 1

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 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 fulll all

Annual per capita expenditure (INR)

Rural 10

a.

30,200

24%

17,644

41% 49%

14,647

56%

12,755

64%

11,332

74%

their responsibilities responsibilities

9,692

79%

c.

9,130

89%

8,104

103%

7,013 133%

5,436

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

Besides nancial 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

•

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”.


13

Dimensions that the UHC program should address

2. Sustainability for payers

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

1 UHC

► Financial

•

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 efciency for maintaining cost of care levels.

Integrity

•

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

Sustainability ►

Cost of care

Human resource for health care 3 Quality ►

Threshold capabilities for eligible point of care

►

Monitoring quality adherence

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

•

To ensure quality health care for all and equity in access, the program must be nancially viable for providers. Consequently, the following factors shall be important: • Sufciency of reimbursement rates to hospitals •

Human resource for health care

•

Appropriate incentives to make investments more attractive

3. Access to quality care for patients Ensuring 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.

Adequate strength of skilled human resource will be the key determinant of technical success of providers •

14

Cost of care and disease burden/ incidence rates

2

Viability ►

The 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.

UHC should, therefore, include measures to create/enable the creation of skill human resources in required numbers


Section B: Relevant global experiences and imperatives for India I. 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 (dened 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 governmentfunded 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 avor 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 signicantly to health care costs but only marginally to health nancing. Developing countries are struggling to implement UHC and provide nancial protection amid rising disease burden, sustained population growth in addition to nancial constraints associated with health having to compete with other elements of social agenda. International experience strongly suggests that there is no unied 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 nancing 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.


15

II. Evolution of UHC and prevalent models globally Typical UHC models

Beginning of UHC across nations 2010

South Africa (NA)

Single payer

Two tier

Insurance mandated

2005

Vietnam (42) Indonesia (46) Rwanda (92) China (90) Thailand (98) Mexico (98)

Government provides insurance for all citizens and pays for identied health care expenses except for co-pay. Providers may be public,

Government provides

Government mandates that all citizens purchase insurance, whether private or public, which

private or both

purchase of additional voluntary insurance

Typical examples

Typical examples

2000 1995 1990 1985

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

catastrophic or

minimum insurance coverage for all residents (or citizens), while allowing the

1980 1975

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

1970 1965 1960 1955 1950

Canada (100) Ghana (61) Sweden (100) Chile (100) UK (100)

•

UK

provides for costs of

healthcare. In this system insurers are barred from rejecting sick and individuals are required to purchase insurance Typical examples

•

France

•

Switzerland

•

Italy, Spain

•

Denmark

•

Germany

•

Canada

•

Singapore

•

Japan

•

Norway, Sweden

•

•

Australia

•

Ghana, Kenya

Philippines, Korea, Vietnam, Malaysia,

•

Austria

•

Taiwan

•

Netherlands

•

Thailand

•

South Korea

China

1945 1940 1935

Germany (100) Japan (100) New Zealand (100)

* 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.

1930 1925 1920 1915 Norway (100) 1910 (): % of population covered – latest available

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.

16


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

Plan

Pay

Pool

Purchase

Provide

Consolidation of

Raising of sufcient and sustainable revenues from payers efciently and equitably

Target 100% coverage

with minimal out-of-pocket expenditure

raised funds at a national level to

facilitate equitable allocation to states as per respective needs, irrespective of

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

contribution to funds raised

•

Target beneciaries

•

Target coverage services

•

Method of extending coverage

Quantum •

Sources of nancing •

(broad then deep, deep then broad) •

Target proportion of costs to be met

Public spend as a % of GDP

•

•

General taxes vs. premium contribution Sector specic/sin taxes Copayments and supplementary insurance

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

Choice of purchasing model (direct by government, contract

•

incentives to

in services) •

Provision of supplyside nancing promote private sector health care

Empanelment

investment

of providers and

reimbursement models

•

“Efciency” incentivization on provider and

Types of pool: single vs. multiple

beneciary front

pool

•

Degree of standardization

and quality of care

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 country’s health system with respect to health care nancing and imperatives for the design and implementation of a UHC system for India. Countries analyzed in the sample study are:

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

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


17

Plan 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

•

Specic 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 nancing models (except CGHS) provide limited hospitalization cover in terms of benet 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 nancing 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%36f or the middle MPCE class

•

Steps taken by other countries targeting UHC

Learnings for India

Trilateral coverage: (1) Population (breadth): •

18

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: 50–75%

•

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

•

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


Steps taken by other countries targeting UHC •

•

Learnings for India

It takes ~5–10 years for high-population countries to achieve ~100% coverage. •

China’s rural population coverage increased from 3% to 90% in ve 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

•

Plan for coverage should be spread across the next 5–10 years

•

Basic health packages covering both in ith well-dened patient and out-patient carew exclusions – to be dened 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

•

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

•

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

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

Population coverage or service coverage? Mexico, China, Chile, Ghana, Brazil

Population (Breadth)

Followed by

Services (Depth)

Followed by

Korea, Taiwan, Thailand

(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 ~3–4 times that of developed nations (2010): •

7 to 13%: France, Germany, the UK 41

•

27 to 47%: China, Brazil, Mexico, Ghana, Kenya42 •

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


19

Pay The pay process entails raising funds efciently and equitably to nance the UHC program. UHC typically relies on public sources, i.e., general or specic taxation, compulsory or voluntary payroll contributions, direct out of pocket

payments such as user fees or copayments.


•

Low public expenditure on health impacts the sufciency 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 scal 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 gure 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%

<20%

80% to 90%

Tax/GDP ratio is currently on the lower side for India. However, the rising middle class (50 million in 2005 and expected to increase to 250 million in 2015 to 580 million in 2020) is expected to increase the addressable base and enhance tax/GDP ratio Tax collection as a % of GDP

17%

17%

India

China

27%

34%

37%

US

Brazil

Argentina

Source: “Index of Economic Freedom”, Heritage Foundation, 2012.


Learnings for India

Raise and allocate sufcient funds for the program Public health care expenditure as a percentage of GDP is higher in developed nations than that in developing nations47.

•

Expenditure on UHC should predominantly be nanced by government sources . Public health expenditure as % of GDP should account for 70%–80% of health care spend, in line with countries that plan to adopt UHC by 2020

•

Financing requirement for each state should

Public health expenditure as % of GDP 9 2.7 2.9

4.2

6.8 3.1 3.1

9.3

8.1

2.1

be detailed on the basis of aspired coverage

(breadth and depth), current health status China Mexico

Thailand Ghana

Brazil Kenya

Switzerland France

Germany UK

and needs

Source: Health care statistics, World Bank, 2010

20



Learnings for India

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

The WHO recommends per capita health care spend of USD 60–65 in low-middle income countries or health expenditure of 4%–5% of GDP to nance a basic health care package for 100% of the population48

•

Countries that have adopted UHC allocate more to health (60%–80% of health care nanced by the government) •

Countries in Africa have committed to spend at least 15% of their scal 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

•

India should target to spend atleast 10% of scal budget on health

•

Health is a state subject and health risks, political will and economic ability to contribute toward providing health care vary signicantly between states. To truly universalize health care, “pooling of political will” is required to align and unify UHC’s design and implementation across the country

•

Accordingly, general taxation is to be deployed, i.e., cesses/surcharges/income-rated contributions to nance the aspired requirement given the large informal sector population

•

Nominal fees should also be charged as a prepayment for health card that is to be paid by all population groups: formal/informal

•

Top up premium and voluntary private insurance can be availed for uncovered ailments/care for higher income segments of the population

Method of raising funds (1) Prepayment via general tax/premiums •

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

•

Adopting nations

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

•

Most of the developed

•

Thailand, Indonesia, Malaysia and Sri Lanka in Asia

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

•

Developing nations

•

The Philippines, China,

nations

Korea •

Brazil, Mexico, Chile

•

A few developed nations including Switzerland, France and Germany

Universality is the fundamental tenet of a UHC nancing 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 xed premiums (the Philippines, China) if they belong to the informal sector


21


Learnings for India

(2) Innovative funding mechanisms to supplement tax revenue •

•

To supplement general tax revenues, most developed nations have adopted innovative funding mechanisms to nance public revenue for health51:

•

Alternative modes to supplement general tax revenue based on evidence-based approximations considering sufciency and costs of fundraising

•

Share of VAT earmarked for UHC (Ghana, Chile)

•

Sector-specic taxes (the US, Australia, Gabon)

•

Sin taxes: on consumption of fatty food, alcohol, etc. (Canada, France, Finland, Australia)

•

Sin taxes (tobacco)

•

Sector-specic taxes

•

Tourism taxes (France)

•

•

Export-import taxes (Brazil)

Contribution from auctions/allocation of natural resources by the government. Traditional resources: land, power, mining, coal spectrum, SEZs, etc.

Countries such as China have adopted land sale proceeds at the local level as a key source of funding. However, sustainability of this practice is questionable given that revenue from land sales fell by 30% in 2011 52.

(3) Copayment (a specied amount paid by the user at the point of service) A WHO study of 50 low- and middle-income countries revealed that only 6 countries did not require payment of user fees at government facilities. The WHO recommends OoP health payments to be lower than 15%–20% in the long term and 20%–30% in the mid term53.

•

Consumers should be made to realize the “ value of health care availed ” through the levy of nominal user fees or copayments. •

Minimal xed copayment (10%–20% of health expenditure) with exemptions to specic groups (i.e., BPL families) to streamline consumption but at levels that do not delay access to care and ensure nancial protection

•

For segments of population that may not be able to afford such copayment, effective linkages to micro credit schemes to support repayment

•

Gradually, copayment to be phased out, as the health care system becomes more cost efcient and effective with the maturing of primary care and triaging models.

Typically, copayments depend on income levels, type of hospital, procedure, etc.: •

Germany: Copayments for certain set of services depend upon a person’s income

•

China: Copayments depend on the length of stay, type of disease and amount of services provided; the poor are exempted from copayments

•

Korea: Copayments depend on the type of care (in-patient or out-patient) or type of health care facility (pharmacy, clinic, general hospital or tertiary care hospital)

•

Chile: Copayments depend on income levels, except for primary care, which is free for all

There may even be xed minimal copayments, as is the case in Thailand, which had a xed user fee of 30 baht for all cases prior to 2006.

22


Pool Pooling refers to the consolidation of raised funds at a national level to facilitate equitable allocation to states, as per respective needs irrespective of contribution to funds raised.


Health is a state subject in India, and priority and spend on health care varies across states Expenditure on Medical and Public Health and Family Welfare/aggregate expenditure (%) 3%–4%

4%–5%

5%–6%

12 states

12 states

5 states

54

•

Disease burden also varies across states, necessitating exible and differential norms for planning and allocating UHC nancing so that physical, socio cultural and other diversities across states can be managed

•

High level of variability exists in the adoption of public health nancing schemes such as RSBY across states, as is indicated by enrollment data. This impacts the quality of pooling Enrolled BPL families in RSBY/total BPL families 55

Delhi

0%–20%

UP

20%–40%

Haryana, Karnataka, Maharashtra, Bihar, Punjab, Gujarat, Rajasthan, WB

40%–60%

Himachal Pradesh

60%–80%

Nagaland

80%–100%

•

The health care insurance industry is highly fragmented, with multiple schemes (CGHS, ESIS, Yeshasvani, Rajiv Aarogaya Scheme, RSBY, etc.) and lack of interoperability since schemes are varied

•

Ineffective pooling manifests in risks related to adverse selection faced by both the public and the private sector •

Average claim ratio for private players: 80%–90% 56

•

Average claim ratio for public entities: 90%–100% 57


23


Learnings for India

Countries have adopted single/multiple pool as per their own country context (1) Single pool (the UK, Taiwan, Mexico, Brazil, Canada) •

Ensures optimal risk subsidy (pooling high-risk and low-risk individuals) and equity subsidy (high- and low-income individuals), thereby enhancing accuracy in predicting pool costs

•

Generates economies of scale in administration and other costs

(2) Multiple pool (China, Germany, Thailand) •

Increases exibility in scheme administration but also promotes equity and risk selection problems with duplication of costs

•

Given that health is a state subject with variations in political will, income and risk prole across states, UHC will require centralized pooling of funds at national level and allocation to states in alignment to their respective health risk needs, irrespective of their contribution to funds raised

Countries with multiple public and private pooling arrangements are trying to neutralize nancing and health risks through risk equalization measures (re-distribution of funds from health plans with lower risks to plans with higher risk) or are consolidating to create single fund pools. Korea, for example, merged more than 300 individual insurers into a single fund to enhance efciency and reduce risk selection issues 58. Other examples of countries that have implemented risk equalization measures include Switzerland, Japan, France, Germany and the Netherlands.

24


Purchase Purchase refers to the transfer of pooled resources to service providers on behalf of the covered population to put in place effective purchasing models and payment mechanisms.

Current Indian context: In addition to out of pocket purchase, the following two models of purchasing health services exist in India under various private and public insurance programs: •

•

Purchase through private health insurance: •

Insurance companies (public/private) purchase health services by contracting health care service providers on fee for service basis

•

There is a gradual move toward xed disease-wise payments by public sector health insurance undertakings (GIPSA) — a related shift to the diagnose-related-groups (DRG) model from the Fee for Service (FFS) model.

•

In GIPSA, differential tariffs exist depending on hospital gradation based on specic criteria (number of beds, specialties served, built up area, occupancy, etc.)

Purchase through publicly nanced health insurance schemes (RSBY, Aarogyasri): •

Insurance companies (public/private) purchase health services, and these are appointed by state governments through a competitive bidding process

•

Most publicly nanced health insurance companies purchase services from public and private providers based on xed disease/ procedure wise payments (similar to DRG model)


Learnings for India

Choice of purchasing model and empanelling providers •

“Direct purchase” by government in countries with strong public health infrastructure; these include the UK, Sri Lanka and Thailand

•

“Provision by government and contract in from private providers” in countries with both public and private health infrastructure; these include France, Germany, China, Mexico, Brazil, Malaysia and Indonesia

•

“Purchase by independent agency” (single/multiple) or insurance agency in countries such as the US and Switzerland. These agencies typically empanel providers that fulll eligibility criteria

•

Purchase of health care by insurance companies (single/multiple) which may be state specic (depending on size of state)

•

Purchase agency should be responsible for empanelling providers. Enrolling the population into the universal scheme can either be done by the purchase agency or an independent body

•

Criteria of transferring funds from the pool to the purchasing agency can be on the basis of the number of beneciaries enrolled .


25

Steps taken by other countries targeting UHC Choice of payment mechanism Countries worldwide mainly follow four payment mechanisms: Methodology

Pros

Learnings for India

•

efciency and clinical outcomes rather than

focus on revenue generation .

Cons

•

(1) Fee for service (FFS): Germany, China, Korea, Mexico, Brazil

Providers are paid according to the number of services delivered; this has traditionally been the most prominent model

•

•

High quality amid intense competition

•

patients are free to

Incentivizes overprovisioning of services

by provider

High accessibility, as •

choose physicians

Associated increase in administration costs

(2) Capitation: Thailand, Vietnam, Chile, Italy, the UK

Providers are paid a xed amount based on the number of patients served

•

•

Cost containment, as payments to providers are xed

•

Under-provision of services given the xed at rate capitation

•

Focus on preventive care to limit footfall of in-patients

•

May limit patient choice (if patients are linked to empanelled providers or physicians)

The provider payment model should incentivize

This can be done through xed reimbursement mechanisms (e.g., reimbursement to be based on DRGs, average actual costs within DRGs, capitation for primary care with a shift away from fee for service arrangements) supplemented with variable payouts to incentivize outcomes

Differential reimbursement rates for stratied

provider groups based on technical (beds, built up area, specialties offered, accreditations, etc.) and nancial criteria (cost of capital, return on capital and operating overheads). Criteria should be restricted to standard condition of infrastructure requirements and levels of operating expenditure required for each grade of provider care facility empanelled.

(3) Diagnose-related groups (DRG): Thailand, Indonesia, Switzerland, China

Patients are classied into groups based on their medical condition, with the assumption that they would have comparable hospital resource use and costs. Providers are reimbursed at a xed rate per

•

Cost containment, as all payments fall under a particular category

•

Premature discharge/ under-treatment given the xed fee model per procedure

•

Single event may be assigned multiple DRGs to increase billing

discharge based on the

patient group (4) Per diem: Kenya Providers are paid on the basis of number of days of care provided

•

Easy to administer

•

Less cost effective, as providers are incentivized to

increase the number of admissions and length of stay

Most countries have been adopting a mix of these methods to achieve optimal results. The general trend is: Provider payment mechanism

IP care

OP care

Fee for service Capitation

DRG/average DRGs

Pre-diem

Adoption rate 26

Increasing

A gradual shift is visible in terms of decreasing levels of free-forservice model usage, and increasing adoption of the capitation model for OP care and DRG model for IP care. Most countries are moving towards a hybrid model (xed + variable incentive) which should incentivize efciency of resources/inputs and achievement of clinical outcomes by moving away from indicators linked directly to revenue generation via FFS arrangements

Decreasing Universal health cover for India: demystifying nancing needs

Provide Provide refers to the process of ensuring “quality” and “adequate” health care delivery, with minimum waste of resources and focus on primary and promotive care.

Current Indian context •

Demand-supply gap: Despite higher disease burden (37% higher DALYs than Brazil and 86% higher than China), there is decit of health care infrastructure — physical and human (rural and urban) 59— in India Per 1,000 population

•

China

Brazil

Global

Beds

0.9

3.0

2.4

2.7

Doctors

0.6

1.4

1.7

1.4

Nurses

1.3

1.0

2.9

2.8

Limited supply-side nancing incentives to channelize private investment in targeted areas •

•

India

Provisions under the Income Tax Act (80-IB) and the new section 35 AD, proposed to be extended to the health care sector from FY12, inadequate to generate the required boost in investment activity

Limited quality consciousness due to lack of standardized guidelines and enforcement •

Low accreditation rates of public hospitals (during 2009–12, only 7 public hospitals received NABH accreditation as against 128 private facilities60)

•

Lack of uniformity in the implementation of Clinical Establishment Act

Steps taken by other countries targeting UHC (1) Supply-side nancing to channelize private health care investment

Learnings for India

•

The government should encourage the private sector to participate in specic focus areas to complement public health care provision.

•

The government should allow targeted nancing for the private sector as follows:

in targeted areas Countries with a relatively sub-optimal health care infrastructure have adopted supply-side nancing measures to stimulate private investment. This allows effective generation and distribution of health care infrastructure to serve the unleashed demand from UHC adequately.

•

Examples

Tax holidays, capital expenditure deductions for investments in designed zones

•

Specic incentives for channelizing investments to promote the following health system efciencies:

•

China: policies to permit the private sector to participate in the restructuring and management of state-owned hospitals

•

Thailand: corporate tax exemption for 3–8 years subject to location criteria for hospitals with minimum 50 beds

•

Allocative efciencies (through thrust on primary care)

•

Indonesia: 50% reduction on land and building tax for new private hospitals

•

•

Brazil: incentives for domestically manufactured medical equipment

Technical efciencies (to minimize operating costs while maintaining quality)

•

Dynamic efciencies (to promote technology interventions to improve outcomes, governance and productivity)

This has been elaborated in Section C under “Case for supply side nancing” Universal health cover for India: demystifying nancing needs

27

Steps taken by other countries targeting UHC (2) Effectiveness and efciency

Learnings for India

•

High health care output is an imperative in the case of UHC and is achievable only through a high level of input. This would require efcient deployment of human and physical resources (men, material and machines). Various studies estimate that nearly 20%–40% of health care costs are wasted or sub-optimally utilized.

Public and private health care facilities should offer a complementary mix of health ith: servicesw •

Choice left to the patient

•

Similar standards and requirements made applicable to both

This may require the government to invest adequately on equipping and upgrading public health care facilities

Most countries are adopting an integrated approach to rationalize the cost of health care delivery while maintaining quality. •

Potential efciency gains for hospitals 61

and the provider

Areas

High income countries

Mid income countries

Low income countries

Human resources

8%–16%

7%–14%

8%–15%

Materials

1.5%–3%

2%–5%

2%–5%

3%–8%

5%–10%

5%–10%

Intervention mix

10%–20%

10%–20%

10%–20%

Total

20%–40%

20%–40%

20%–40%

Revenue leakages

Key practices being adopted to rationalize the cost of delivery: •

Effective payment models for the beneciary •

Well-designed reimbursement rates based on realistic costs of care and in compliance with prescribed standards

•

Effective checkss uch as algorithms and checklist-based objective risk assessment to validate the need for surgical procedures and for stricter compliance

•

Well-designed centralized procurement of drugs/medical devices, use of generic generics and indigenous technologyt o reduce costs of treatment

•

Effective hub and spoke models for delivering a continuum of care

Demand-side restrictions such as co-pays, managed care, incentives on the beneciary front (across most countries)

•

Delivery of care by non-physician health workers based on standard protocols and seeking remote medical advice from physicians where required

•

Supply-side restrictions such as long waiting lists for admissions, investigations (Canada, the UK), optimal reimbursement models to providers

•

Mandatory use of generics in countries such as Germany. Nation-wide public campaigns in countries such as France to reduce antibiotic prescriptions by 25% over ve years62

•

Gate keepingf or referrals to secondary/ tertiary care with disincentives for bypassing referral routes

•

Administration costs not to exceed 8% (from 25% earlier) of health budget in Kenya through effective monitoring, accountability and execution discipline63

•

Job exibility and skill broad-basing through

•

Focus on primary care (Thailand, Sri Lanka)

28

standardization •

Focus on replicating Thailand’s model of primary and promotive care to reduce disease burden; RSBY studies have indicated that a 1% increase in primary care can reduce hospitalization rate by 0.03%64.


Steps taken by other countries targeting UHC (3) Quality of health care delivery

Learnings for India

•

Provision of optimal ‘quality of care’ within available resources serves the dual purpose of enhanced outcomes and increased cost effectiveness. Quality of health care service provision would entail compliance with standards, collection of accurate data and monitoring of health care provision based on the analysis of the collected data. This has been driven by most countries through central oversight boards/agencies. Examples of quality enhancement measures implemented by various nations

The government should set up an independent agency( on the lines of NABH, which is an autonomous body on quality and accreditation in the country) to monitor the quality and efciency of the health nancing system. It will be responsible for the following: •

Design of standard evidence-based treatment guidelines

•

Accreditation of hospitals – both public and private; formulation of health care package and reimbursement rates by provider category

•

Benchmarking of health care facilities with performance-based incentives Screening of reimbursements based on

Thailand: •

A central board is responsible for the design and implementation of quality standards.

The Philippines: •

Performance-based grants are provided to facilities.

•

•

PhilHealth, the agency implementing UHC, is monitored and evaluated by National Institute of Health.

•

objective criteria grievances

Indonesia: •

•

There are vericators in every network hospital that follow a standard review process for every case. Vericators also process claims and send them electronically to MoH.

The UK: •

Health care facilities are benchmarked against the performance of their peers on a number of activity measures including day case rates and length of stay.

•

A quasi-market arrangement rewards providers with greater patient satisfaction than peers.

Call centers to register complaints and

•

Audit and compliance

Integrated and inter-operable EHR systems should be set up across all providers to monitor pay vis-à-vis performance, collect basic health and epidemiological data, and ensure uniformity in clinical governance.


29

Besides drawing on learning from global UHC models, the Indian Government will have to address likely governance and administrative challenges in a UHC scenario. In this context, learnings from the two quasi universal coverage programs currently operational, viz., Rashtriya Swasthya Bima Yojana (RSBY) and Rajiv Gandhi Aarogyasri Scheme (RAS), could be useful. A summary of the learnings has been provided below: Key parameters

RSBY

RAS

Key learnings

1. Access to patients •

Enrollment of beneciaries

•

The insurance company appointed by the state government is responsible for enrolling BPL beneciaries.

•

Financial incentive for health

•

insurers is assured by linking premium outow with number of enrollees. •

•

Empanelment of providers

•

Effective use of smart cardbased system for beneciary identication /verication, point-of-service processing of client transactions; in addition, this facilitates the maintenance of patient records and portability across geographies for patients. Empanelment of providers in a manner that can result in equitable access for all beneciaries is a challenge in the absence of formal guidelines to health insurers, as well as limited provider network largely in rural areas; consequently, higher number of providers are enrolled at district headquarter level than at the block levels in certain districts.

Beneciaries are responsible for registration under the scheme by visiting designated counters at PHCs, participating in health camps or directly at network provider locations. Consequently, beneciary enrollment may be delayed or does not take place due to beneciaries lacking awareness, health camps not being conducted regularly or lack of PHC counters.

•

Entitlement cards should be mandatory for enrollment. The onus for enrollment should be put on potential beneciaries.

•

Technology should play a key role in the identication and verication of beneciary, monitoring, auditing and enforcing

compliance.

•

While the RAS trust intends to ensure that at least 8 basic specialty hospitals and 2 multispecialty hospitals are empanelled in each district, in the absence of a formal process to ensure implementation and due to the lack of provider network, there is district level disparity in the number of empanelled hospitals.

•

Premium transfer should be based on beneciary enrollment.

•

A minimum target number of providers to be empanelled in each district should be set up. Access should be provided depending on

the population of the district. •

Strict empanelment guidelines should be put in place.

2. Awareness among patients •

Awareness creation programs

•

Institutional awareness creation through health camps and hospital visits are not effective in all districts, limiting enrollment and usage of benets under the program

•

Awareness creation programs should have a robust design.

•

In the absence of a gate keeping system, patients are directly admitted to hospitals even for non-severe medical conditions/ conditions not requiring hospitalization or surgery. Consequently, there may be instances where hospitalization/ surgeries are performed in cases where they are not required.

•

Robust checklists and guidelines should preclude hospitalization, except in case of emergencies.

3. Integrity among providers •

30

Right treatment to patients

•

While a referral mechanism exists, the same is provided by an in-house doctor in case the beneciary directly visits a network hospital. Consequently, there may be instances where hospitalization/surgeries are performed without a clear need for them.


Key parameters •

Claims audit

RSBY •

A formal process for independent audit of claims data has not yet been institutionalized. This results in the absence of checks and balances to ensure that fraudulent claims are not being processed.

RAS •

There is no formal process for independent audit of claims data.

Key learnings •

A robust audit mechanism needs to be set up.

•

Strict implementation of penal clauses should be undertaken.

•

There is need for

4. Patient rights: quality service, grievance redressal •

Health care quality standards

•

for providers

While a basic criterion exists for the empanelment of providers, mechanisms are yet to be developed to enable

•

especially public providers, to improve their quality standards in compliance with the envisaged norms.

quality across providers/provider categories.

•

Grievance redressal mechanism

In addition, limited monitoring structure to ensure that quality standards are maintained and followed on a continuous basis. There is no mandatory licensing or quality certication requirement for providers.

•

There is no formal mechanism for incentivizing providers to improve their quality standards.

•

Providers are not graded based on infrastructure and technical capabilities. No differential reimbursement rates based on gradation exist.

•

No formal mechanism is in place

an independent

rating agency to rate hospitals on dened quality standards (e.g., NABH).

in place to incentivize providers,

the standardization of service

•

While a dened criterion exists for the empanelment of providers, no mechanisms are

•

•

There is no mandatory licensing or quality certication requirement for providers.

•

Providers are not graded based on infrastructure and technical capabilities. No differential reimbursement rates based on gradation exist.

•

There is a mechanism in place

for recording patient grievances

for recording patient grievances

and ensuring timely resolution.

and ensuring resolution.

Reimbursement rates should vary for hospitals with different

ratings.

•

A robust mechanism needs to be put in place to redress grievances.

Source: Evaluation of RSBY- A case study of Amravati District, IIM Bangalore, February 2011; RSBY Guidelines, 2008; Performance Trends and Policy Recommendations, RSBY Working Paper, September 2011; Health care Utilization in Rural Andhra Pradesh, Economic& Political Weekly, January 2011; Aarogyasri and RSBY website, accessed on 11 August 2012

In a nutshell, the two programs clearly highlight the need for a comprehensive governance and administrative framework with focus on: i.

Equity in creation of access for patients

ii.

Adequate awareness creation

iii.

Enforcing integrity among providers while providing services

iv. Emphasis on standard quality of care v.

Redressing of patient grievance


31

Proposed schematic of UHC design Centre

Breadth: 100% population coverage

Plan

Depth: Basic health package

Height: Minimum co-pay to be defined

Sector specific supply side financing to

providers Pay

Issue of health card

Purchase

Provide

General taxes, sin taxes

Individual

Voluntary insurance

Private insurance company

Centre

Centre

Pool State

Enrolled population

Enrolling agency

►

Reimbursement

Patient ►

►

Minimum Co-pays

s n o i t a l u g e r

e c i r P

►

Independent agency

EHR and technology Provider

Quality of care

s u c o f e r a c y r a m i r P

Specific

exemptions Functions of a UHC program

Formulates Access criteria

► ►

Key stakeholders involved

32

Transfers of per capita risk adjustment premium to states

State

Empanelment and

Central independent agency

tariffing criteria ►

Standard treatment guidelines

►

Audit and compliance


Criteria for fund transfer to agency – number of beneficiaries enrolled

► ►

Empanels providers IP Reimbursement model (Fixed + Variable) linked to outcomes and efficiencies

►

OP Reimbursement model (Capitation/ case based)

Section C: Demand model and nancing requirements for UHC This section focuses on estimating the nancing requirement for UHC in 2021–22 by developing a demand model for health care services and estimating likely changes required on the supply side once health care becomes affordable for all under UHC. To illustrate and estimate nancing requirement, we have assumed the broad contours of UHC as under: Outline of the UHC scheme: •

Eligibility for coverage

100% population of India

•

Package of service

•

For in-patient treatment •

For out-patient treatment

• •

Exclusions

•

Comprehensive range of secondary and tertiary care services; this will include all treatments and procedures currently covered under the RSBY and Rajiv Gandhi Aarogyasri schemes and level of hospitality as envisaged under these schemes. This could potentially cover 90% of ailments and procedures65. Consultation fee, drugs, diagnostic tests, minor procedures Any private OoP expenditure incurred on account of:

• •

Top-up insurance premium or expenditure incurred on the treatment of uncommon/niche ailments/ conditions not covered within the ambit of primary, secondary and tertiary care services envisaged under the program

•

Higher private expenditure incurred if people choose to avail higher comfort and hospitality during their stay at a hospital (e.g., private rooms)

Implementation of the UHC scheme is likely to considerably enhance affordability and consequently drive a signicant increase in active demand for health care services. To illustrate and estimate this change in demand, we have created alternate scenarios. : Key considerations for estimating an increase in demand for health care services: •

During 2009–10, hospitalization rate in India was around 3% of the total population, resulting in approximately 3.56 cr cases of in-patient treatment. In addition, the number of out-patient cases was around 240 cr 66.

•

Alternate scenarios for estimating projected hospitalization cases in 2021–22 have been worked out considering key drivers of growth over 2009–10 as follows: A. Common assumptions 1. Population growth •

Growth in population projected at 1% every year is likely to increase volume of in-patient cases in 2021–22, assuming hospitalization rate to be constant at 2009–10 level of 3%,

•

Estimated population for 2021–22 is 135 cr.

2. Shift in disease burden •

Shift in burden of both communicable and non-communicable diseases is likely to increase in-patient cases incrementally over and above population growth, increasing hospitalization rate by 7% over the 2009–10 level.

•

Basis for estimating the impact of disease burden: •

Four key non-communicable diseases considered are CVDs, diabetes mellitus, oncology and neurological disorders.

•

Based on NCMH projections w.r.t. the prevalence of these diseases during 2005–2015, the estimated 10-year CAGR for prevalence has been determined. The CAGR has been applied to the estimated prevalence for 2021–22.

•

Assuming that the ratio between prevalence, persons reporting ailment (morbidity) and hospitalization rate remains at 2004–05 (as per NSSO report on Morbidity, Healthcare 2004) levels, the number of hospitalization cases for 2021–22 has been extrapolated.


33

B. Scenario-specic assumptions

2021–22 scenario A: base case

Impact of affordability on hospitalization

•

rates

OP demand estimations

2021–22 scenario B:aggressive case

The bottom 40% (four deciles) of the population, based on MPCE classes, will witness the same growth in average hospitalization rate as that under government-led quasi UHC social insurance schemes (such as the RSBY scheme, where the average hospitalization has increased from 1.8% to 2.8% for the bottom 40% population covered under RSBY).

•

For the upper six MPCE classes, the rate of increase in hospitalization rates between 2004–05 and 2009– 10 for the respective deciles has been assumed to continue over the next one decade.

•

OP:IP ratio (based on NSS 66th Round 2009-10) has been used to project OP cases from IP demand as estimated above

•

Hospitalization rates will increase

from the current 3% to 5.5% across all deciles of the population. This will be equal to the hospitalization rate of the top 10% of urban households by MPCE class (assuming this class has access to and can afford to fulll most of its health care requirements).

•

OP:IP ratio (based on NSS 66th Round 2009-10) has been used to project OP cases from IP demand as estimated above

Impact on demand (IP and OP)

•

Hospitalization rate: 4.1%

•

Hospitalization rate: 5.5 %

•

Total in-patient cases including population, burden of disease and affordability growth:~ 5.5 cr

•

•

Estimated number of out-patient cases: ~ 415 cr

Total in-patient cases including population, burden of disease and affordability growth:~7.5 cr

•

Estimated number of out-patient cases: ~ 560 cr

Source: EY analysis

While primary care intervention is expected to bring about an improvement in the rate of hospitalization, this assumption has been excluded from the estimations, as the impact is likely to bring down the hospitalization rate to a number between that of the base and aggressive case. Managing non communicable diseases at low costs

Efforts are being undertaken by the government and private sector players to develop viable and sustainable models for primary care services, especially in rural areas. These models are focused on developing mechanisms to reduce OoP expenditure of patients on primary care services, as well as reduce the overall incidence of hospitalization cases. For example, a pilot effort covering a million rural population in ~200 villages of Maharashtra and Andhra Pradesh, under the aegis of Care Foundation, in partnership with Center for Insurance Research & Management, Chennai, has demonstrated that diabetes can be managed at a cost of INR50 per month (~1 USD) including consultations, drugs and diagnostics, by laying down standards of primary care. Further, high blood pressure can be treated for INR25 per month. The pilot program is also validating an out-patient microinsurance product costing INR400 per year per family of four, and also it will study the impact on hospitalization rates through these preventive interventions.

Source: EY analysis

34


Growth in in-patient and out-patient cases Growth 111% Growth 54%

1.16 In-patient cases (crores) 0.78 5.5

7.5

3.56

2009-10

Hospitalization rate (%)

2021-22 Population and burden of disease impact

2021-22 Affordability impact

3%

Growth in hospitalization rate (%)

Out patient cases (cr)

240

2021-22 Base case

2021-22 Aggressive case

4%

5.5%

35%

84%

415

560

Source: EY analysis Please refer Annexure 1 for the details of methodology and estimations for demand model and financing requirements

Estimation of cost of nancing the UHC program (in 2021–22) •

To nance the UHC scheme as mentioned above, government health expenditure is estimated at 3.7% of GDP in the base case scenario and 4.5% of GDP in the aggressive case scenario67. This estimate includes expenditure of 1.3% of GDP, which the government is expected to continue spending on nancing the current public health care infrastructure and running its preventive and promotive health schemes.

•

Assuming OoP expenditure of 20% to 30% for exclusions mentioned in the outline of the proposed scheme, total expenditure on health is expected to be between 5.5% and 6% of the GDP 68.

Please note: this estimation does not include the following: •

Impact of the use of generic medicines, which can substantially reduce expenditure on drugs

•

As public facilities can also get reimbursement for the services provided under UHC, funding requirements for public hospitals and medical colleges would reduce, which could further bring down government expenditure


35

Estimated health care expenditure (INR cr) in universal health coverage scenario by 2021-22 Hospitalization rate

4%

Hospitalization rate

5.5%

In-patient cases

5.5 cr

In-patient cases

7.5 cr

Out-patient cases

415 cr

Out-patient cases

560 cr

Govt. Health care Expenditure (as % of GDP)

3.7%

Govt. Health care Expenditure (as % of GDP)

4.5%

5,47,000 5,47,000

15,72,000 13,41,000

7,74,000 5,74,000

18,88,000

10,24,000

5,67,000 4,50,000

Coverage of Coverage of in-patient out-patient cases cases

Coverage of Total Additional Total in-patient coverage govt. spend health care cases under UHC on health care expenditure Base case

Coverage of out-patient cases

Total Additional Total coverage govt. spend health care under UHC on health care expenditure

Aggressive case

Source: EY analysis

Increasing demand for health care services over the next decade will drive the need for building adequate physical and human resource infrastructure on the supply side.

government hospitals and primary health care centers contribute around 0.5 beds per 1,000 population71. •

Assuming no change in bed occupancy ratio and average length of stay, around 1.2 beds per 1,000 population would be required to cater to the increased demand in the base case scenario and around 1.7 beds per 1,000 population in the aggressive scenario by 2021–22.

•

To meet the base case requirement, around 16.5 lac beds would be required by 2021-22. This works out to 22.4 lac beds in the aggressive scenario.

To meet the demand released, India would need to add 5.6 to 11.5 lac hospital beds by 2021–22 with focus on reducing regional disparities in current bed distribution. •

36

Currently, India has around 0.9 beds per 1,000 population69 (~10.8 lac beds) with an average bed occupancy ratio of around 72% and average length of stay (ALOS: in number of days) of ~8 to 9 days70. Of these,


Base case (4% hospitalization) ALOS

Aggressive case (5% hospitalization)

8 days

8 days

Bed occupancy

72%

72%

Secondary care beds (lacs)

13.7

18.7

2.8

3.7

16.5

22.4

5.6

11.5

Tertiary care beds (lacs) Total beds (lacs) Additional beds required (lacs) Source: EY Analysis

The government should make optimal use of the existing infrastructure. This requires a concentrated effort to decrease ALOS by at least one day in next ve years. This could reduce the number of beds required by over 2 lac, in turn avoiding capital expenditure.

•

currently estimated at 1.3 per 1,000 population73, resulting in around 2.2 nurses and midwives per doctor.

Apart from additional 9 lac doctors for primary care services, around 1.2 lac specialist doctors will be required to meet the rising demand for secondary and tertiary care services in the aggressive case. Doctor density per 1,000 population in India is currently estimated at 0.572. The density of nurses and midwives is

•

•

With increasing requirement for health care services, it will be important to align doctor density with global norms such as WHO recommendations. The WHO recommends 1 doctor per 1,000 population and 3 nurses and midwives per doctor.

•

To meet the target of 1 doctor per 1,000 population even by 2029–2030, another 9 lac doctors would be required. This translates into the addition of 20,000 medical seats by 2018 to the existing capacity of 43,000 seats per annum.

Aspired doctor density and additional number of doctors over the next two decades

1.0 12 0.9

1.0

15 1.0

0.9 0.9

0.8 0.8 9

7

0.5

0.5

0.5

0.5

0.6 0.6

0.6 0.6

0.6 0.6

0.6 0.6

0.6 0.6

0.7 0.6

0.7 0.7

0.7 0.7

0.7 0.7

0.8 0.7

0.7

0.8

0.8

0.8

0.8

0.8

0.8

0.8 12

11

9

7

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Doctor density based on current state

Doctor density with addition of seats

Number of doctors (lacs) post addition of new seats to align with WHO norms Number of doctors (lacs) as per current state (with existing pool and additions based on existing seats) * Doctor density is equivalent to number of doctors per 1000 population Source: EY analysis


37

•

The addition of 20,000 medical seats will make the aspired doctor density plausible not before 2030. To address the gap in the meantime, the government could consider training rural medical practitioners and introducing bridge courses in allopathic medicines to skill AYUSH doctors, who can operate as family physicians with license to practice in rural setting. If implemented appropriately, this can signicantly reduce the requirement of additional colleges and would avoid the need of capital, as well as reduce the challenge of getting quality faculty for the proposed medical colleges.

Consequent to this supply-demand gap in specialist availability, the addition of 3.5 lac secondary and tertiary care beds (out of the 11.5 lac mentioned above) may not be feasible. Options available are: •

Increase the number of education seats for post graduates and specialists by ~ 50%

•

Increase efciency in hospital operations by reducing ALOS and increasing bed utilization; a 20% improvement in bed utilization and reduction in ALOS (through measures

Additional hospital beds and shortfall in number of specialists required 1.4

Total

1.3 1.2 1.1

11.5 lacs beds

1.2

1.0 0.9 0.8

0.8

1.0

0.8

0.2

0.3

0.3

0.3

0.2

0.2

0.2

0.2

0.3

0.3

0.4

0.2

0.2

0.2

0.4

0.4

0.4

0.4

0.2

0.2

0.2

0.2

2020

2021

2022

3.4 lacs specialists

2.2 lacs specialists 2012

2013

2014

2015

2016

Additional number of specialists required (lacs)

2017

2018

2019

Specialists added as per current state (lacs)

Additional beds (lacs)

Source: EY analysis

With increasing hospitalization rates and a consequent increase in demand for secondary and tertiary care services, the demand for specialist doctors will also increase. In the aggressive scenario of 5.5% hospitalization rate, the additional number of specialists required is estimated to be around 3.4 lacs. At the current rate of addition, this is likely to result in a shortage of 1.2 lac specialists.

38

such as improvement of internal efciency, focus on day care surgeries) can service the hospitalization requirements without the need for creating additional 3.5 lac beds by 2021–22.


Key assumptions used for above estimations

•

•

Beds are being created for secondary to tertiary care specialties and, hence, would require doctors with at least post graduate qualication.

•

Number of specialist required is 0.3 per bed and number of junior resident doctors is 0.1 per bed (average of number of doctors required as per IPHS for a 400-bed district hospital and typical number of doctors deployed in a 400-bed multispecialty private facility).

•

Number of specialists required has been estimated for the aggressive case, wherein around 11.5 lac beds would be required for secondary and tertiary care.

•

In addition to doctors and specialists, approximately 13.6 lac nurses and midwives will be required by 2021–22.

•

While several initiatives may be undertaken to address the gap in the number of doctors and specialists as mentioned above, with large variations in the distribution of human resources for health currently, a targeted strategy to promote the setting up of additional medical, nursing and paramedic colleges in states with lower number of seats and poor doctor density would be required. Facility

The increasing demand for doctors will necessitate the setting up of additional 200 medical colleges (100 seats each) by 2018 to meet the target of 1 doctor per 1,000 population by 2030. A PPP initiative in medical education wherein the government allows private players to set up a teaching institute in alliance with district hospitals on mutually benecial terms and conditions should be explored. This would ensure that the required infrastructure can come up in the shortest possible time and with minimal investment.

Estimated capital expenditure required for the proposed addition of physical and human resource infrastructure •

Capital expenditure for the proposed addition of physical and human resource infrastructure is likely to be INR1,26,500–2,49,300 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 beds.

Additional requirement

Capex (INR cr)

Base case

Aggresive case

Base case

Aggressive case

Secondary

Beds (lacs)

4.6

9.6

73,200

1,71,500

Tertiary

Beds (lacs)

0.9

1.9

23,300

47,800

Medical colleges

No. of colleges

200

200

30,000

30,000

1,26,500

2,49,300

Total

Assumption : ►

Capital investment required to set up facility on per bed basis: INR20-25 lacs,

►

Capital investment to set up medical college- INR150 cr per college of approximately 500 beds

►

Average length of stay for secondary and tertiary care facilities: 5 days

►

Bed capacity utilization for secondary and tertiary care facilities: 80%


39

Case for supply-side nancing UHC demands an elevated degree of optimum and efcient provision of health care services, i.e., adequate and quality health care delivery at an optimal cost. Given India’s unique characteristics — a vast population with high disease burden, coupled with a grossly inadequate and under-equipped provider infrastructure — effective supply-side measures are non-negotiable imperatives for a UHC program to be successful. These measures are required to initiate and calibrate the required velocity for capacity generation and distribution to be able to service the demand that will get released once health services become affordable under UHC program. At the same time, it will be imperative to manage cost of care and ensure effective governance mechanisms for managing scalability and quality. Keeping this context in mind, the following supply-side constraints and challenges would need to be addressed through focused interventions: Critical success factors for effective and sustainable UHC

I. Emphasis on provision of primary and preventive care with a focus on improving health outcomes

Rationale for incentivizing private sector participation •

Primary care is the foundation of the health of a nation. Primary care reduces disease burden (measured in terms of DALY) and also reduces the number and cost of hospitalization visits. RSBY pilot studies suggest that a 1% increase in primary care usage can reduce hospitalization rate by 0.03%. In the Indian context, this becomes even more critical, given the scarcity of specialist and inpatient infrastructure, as well as the time it takes to increase supply rate, coupled with the massive scal burden of nancing health care for 120 cr people. Effective primary care will inevitably be the foundation on which the dream of UHC will take shape. As per our estimate, two-thirds of government expenditure would still need to be on primary, promotive and preventive care with focus on mother and child care, advocacy and outreach programs for screening, health awareness creation for non-communicable diseases and strengthening diagnostic services in public health facilities.

The government will continue to play a predominant role and will actively invest in critical

•

gap lling given the sub-

optimal state of primary care in the country. However, given the importance of primary care,

private sector in primary care( including primary care chains, high investment radiology and pathology centers) through contracting

should be encouraged. Sub-optimal state of primary care in India •

A study on quality of care in out-patient setting74, revealed that: •

Overall knowledge of medical practitioners was very low: in four out of ve typical cases, an average practitioner was likely to be

•

While qualied doctors were equally competent, in terms of diagnostic abilities, doctors in the public sector put in far less effort, spend half the time doing only 60% as many examinations as providers in the private sector

Sub-optimal stafng in government primary care provision •

There is a 62% shortfall in the number of health workers, 36% shortfall in the number of lab technicians and 35% shortfall in the number of specialists and doctors across SCs and PHCs in India


The government’s supplyside initiatives such as NRHM and NUHM (proposed) are likely to be supplemented by increased participation of the

private sector participation

of little help

40

Private interventions that need to be incentivized

the services of organized

primary health care players. •

Given the enormity of latent health needs and low levels of awareness, mass

screening and detection should be an integral part of any primary health care model under UHC. The government should partner with private players to provide these services.


Critical success factors for effective and sustainable UHC

II. Focus on physical infrastructure generation and equitable distribution (beds per 1,000 by 2021–22)

•

Base case: 1.2 beds per 1,000 population for hospitalization rate of 4% (~5.6 lac additional beds)

•

Aggressive case: 1.7 beds per 1,000 population for hospitalization rate of 5.5% (~11.5 lac additional beds)

Health care has been largely concentrated in certain areas driven by the availability of human resources rather than proximity to demand centers.

•

Utilization of curative care services is largely dependent on access to health care services, especially once affordability issues are mitigated under UHC. As observed from the graphs below, states with lower bed density than the national average also tend to have weaker hospitalization rates. Given the better access to health care services in urban areas as compared to rural ones, hospitalization rates are higher in the former for comparable MPCE classes.

•

The skew in distribution of physical infrastructure would need to be bridged by focusing on infrastructure creation in certain underpenetrated states.

•

Base case: INR1,26,500 cr for additional 5.6 lac beds

•

Aggressive case: INR2,49,300 cr for additional 11.5 lac beds

•

Need to rationalize capital expenditure and enhance capital efciency since: a) reimbursements under UHC would be rationalized, potentially earning lower revenues per patient and b) healthcare investments have a long gestation with payback period of 5–7 years

•

With the lack of uniformity of

B. Distribution of health care infrastructure is not aligned with distribution of disease burden •

•

for addition of hospital beds

A. Plug large infrastructure gap •

Signicant fund requirement

Private interventions that need to be incentivized Investment in bed creation in states such as MP, Orissa, Bihar, Haryana, UP, Assam, Chhattisgarh needs to be

promoted by according infrastructure status to health care investments. •

As the creation of new physical and human resource infrastructure may take time, there will be a need for interventions and for incentives that promote equitable access through the use of technology (investments in technology enabled care, viz., remote health, telemedicine) in the interim.

political will and difference in

priority accorded to health by states, the creation of the required infrastructure cannot solely be left to state and, hence, would require the participation of private players

Bed density per 1000 population across states

0.35

P M

0.46

0.51

0.54

0.55

0.59

a s s i r O

r a h i B

a n a y r a H

K & J

P U

0.71

0.8

0.86

n a h t s a j a R

a i d n I

m a s s A

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


41




Skewed hospitalization rates between rural and urban areas at the state level and for comparable MPCE classes, indicating access and affordability constraints

Hospitalization rates across states 4.1% 3.3%

2.2%

2.2%

a s s i r O

r a h i B

3.3%

2.9%

3.0%

3.2%

2.8%

3.2%

2.8%

3.0%

a n a y r a H

K & J

P U

Rural

m a s s A

3.4% 3.7%

3.5% 2.8%

n a h t s a j a R

a i d n I

Urban

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

Hospitalization rates for comparable MPCE classes Average MPCE (INR)

Urban %

Rural %

1011

3.7%

3.6%

830

3.3%

2.2%

599

2.6%

2.2%

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

III. Focus on human infrastructure development and generation (doctors and nurses per 1,000 population) •

Target number of doctors : 1 doctor per 1,000 population

•

Target for number of nurses and midwives : 3 nurses and midwives per doctor

•

Provision of medical education to doctors should be the responsibility of the government. In case the government is not able to add medical colleges commensurate

A. Doctor density per 1,000 population in India is currently estimated at 0.575, with considerable disparity across states indicating equitable access of patients to qualied medical practitioners. Doctor density per 1,000 population

Key states

0.3-0.4

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

0.4-0.6

Himachal Pradesh, Madhya Pradesh, Kerala, Uttar Pradesh, Tamil Nadu

0.6-0.8

Andhra Pradesh, Haryana, Karnataka, Maharashtra, Uttaranchal, Jammu and Kashmir

accretion required, the private sector should be allowed to participate within a welldened framework to ensure transparency and merit in admission, quality of education, operational monitoring and nancial viability.



PPP in medical education should be explored, wherein the government allows private players to set up teaching institutes in alliance with district hospitals on

mutually benecial terms and conditions.

with the rate of doctor

Current state

42

•

•

Medical colleges need to be opened in states with

relatively lower number of medical seats such as Bihar, Uttar Pradesh, Madhya Pradesh and Rajasthan.


B. Nurses and midwives density per 1000 population in India is currently estimated at 1.3 with similar issues of disparity in distribution across states-

Rationale for incentivizing private sector participation •

Signicant fund requirement

Key states

0.3–0.6

Jammu and Kashmir, Uttaranchal, Haryana, Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh, Madhya Pradesh, Rajasthan, Gujarat

0.6–1.0

Himachal Pradesh, Punjab, West Bengal, Meghalaya, Tripura, Andhra Pradesh, Karnataka, Tamil Nadu

1.0–1.6

Maharashtra, Orissa

1.6–2.9

Kerala, Arunachal Pradesh

•

Private sector participation should be encouraged in setting up infrastructure for nursing and paramedic education.

•

Investments in indigenous medical technology in low resource settings should be encouraged through specic incentives.

•

Promotion of “generic generics” in a phased manner: Given the current sub-optimal state of regulatory compliance leading to potential risks of product integrity, an effective quality monitoring regime needs to be institutionalized

for addition of medical colleges •

Nurses and midwives density per 1,000 population


INR30,000 cr for the addition of 200 medical colleges; this will result in the addition of around 1,00,000 beds (at current prices, assuming 100 seats per college and INR150 cr capex per medical college).


C. While the current number of 355 medical colleges in India is likely to add 3.15 lac doctors, improving the doctor density to 0.8 per 1,000 population, there is a need to add 200 colleges by 2021–22 to further improve the doctor density to 1 per 1,000 population.

IV. Focus on cost of health care necessitated under a tightly controlled UHC regime

•

The basic tenets of a UHC program demand cost-effective and efcient delivery of care to minimize nancial burden. WHO studies indicate that nearly 20% to 40% sub-optimality exists in the costs of health care delivered, impacting overall sustainability and viability of the nancer as well as the provider.

High costs of care driven by: •

~ 75% of medical technology is imported

•

~72% of out-patient expenditure is estimated to be on drugs; the branded generic market positions price above cost

of production to varying degree.

to increase the adoption of

generics in health care.

V. Effective governance framework to manage scale, costs and quality of health care delivery An effective and efcient UHC regime demands optimal health system governance, which provides transparency, and denes the appropriate levels of checks and balances to secure the integrity of delivery, as well as provides granular epidemiological data for evidence-based decisions. Epidemiological research to be the responsibility of the government for evidenced based decisions

•

The adoption of information technology will be a critical

•

Mandatory adoption of technology (hospital/clinic management systems) and implementation of standard inter-operable technology systems (EHR/EMR) with weighted deductions should be put in place for such investments.

•

A framework to incentivize providers on performance (outcomes) vis-à-vis dened standards (reimbursements/ bonus payouts) needs to be put in place.

enabler for governance

imperatives and also for efcient and effective delivery of care. Given the benets in the longer term, propensity to invest could be low among private providers; thus, private investment should be encouraged.


43



VI. Advancement of care by building centers of excellence

•

The adoption of UHC as a policy imperative will have an immediate agenda of providing access and affordability to all in the short and medium term. However, the advancement of care will also be an equally important imperative to attain UHC in the true spirit. This will necessitate seeding investments to build institutions that will be centers of excellence in various areas of medical relevance to Indian epidemiology and in designated geographic zones. These can also be accessible to all for the most complex of care and facilitate medical excellence and research. This may necessitate aiming for 10 AIIMS-like institutions in the coming decade with wide geographical coverage and non-metro penetration to fulll this aspiration. This will not only advance care but also be an effective catalyst for bridging human resource distribution gaps (particularly in the case of specialists).


The government will have to play a dominant role, but given the size of our country, private

•

PPP models need to be adopted if private sector

participation is deemed essential.

sector participation will also be

inevitable.

Framework for targeted supply-side nancing Allocative efciency Aims to enhance output of the health system by channelizing investments toward components of health system,wherein marginal cost of producing health care is lesser than the marginal benet derived

Capital efciency Aims to enhance return on capital employed to promote generation and distribution of

Framework for targeted supply-side nancing

Technical efciency

Given the importance and quantum of investment required, targeted stimuli that aid and nance various supply-side efciencies should be provided to health care players.

Aims to minimize cost of inputs for a given level of output or quality or both

private health care

investment

Dynamic efciency Aims to optimize the rate of technology adoption (information, electronic, product, molecular) to improve health outcomes, governance and health system productivity

Summary of key requirements for implementing UHC, driving rationale and key recommendations are highlighted in the table below. Key requirements

Driving rationale

Emphasis on provision of Allocative efciency primary and preventive care with a focus on improving health outcomes

44

Key nancing recommendations •

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 prots and gains derived from operating and maintaining primary health care chains o perating beyond Tier 2 towns to be granted for 10 consecutive assessment years in any 15year period starting from the date of operation

•

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


Key requirements

Driving rationale

Key nancing recommendations

Focus on physical infrastructure generation and equitable distribution

Capital efciency

•

Health care to be accorded infrastructure status : 100% deduction of

prots and gains derived from business of operating and maintaining a hospital should be granted for 10 consecutive assessment years in any 15-year period starting from date of operation subject to the following conditions: •

Any location in specied 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 hospital to have at least 100 beds and as exceptions 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 the infrastructure sector

•

Viability gap fundingu nder the PPP arrangement, i.e., one-time grant/ annuity from government (certain % of project cost) in case expected revenues during the concession period to the private provider are not enough to make the project nancially 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

•

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

Focus on human infrastructure generation and equitable distribution

Capital and Allocative efciency

•

PPP arrangements such as free/concessional land, usage of eligible public health care facilities for medical colleges by private sector in focus states (Bihar, Chhattisgarh, Gujarat, Jharkhand, Orissa, Rajasthan, MP, UP)

Strong focus on cost of health care that is necessitated under a tightly controlled UHC regime

Technical efciency

•

250% deduction of approved expenditure incurred in R&D activities related to indigenous development of medical devices ; for R&D, benets in the form of research tax credits (available in certain developed economies) could be introduced to offset future tax liability.

•

Concessions on utility/energy costs

•

250% deduction on approved expenditure i ncurred on EMR and EHR

•

Penalties f or not sharing outcome/epidemiological data to government

•

PPP models including viability gap funding if private sector participation is deemed essential

Effective governance framework to manage scale, costs and quality of health care delivery

Dynamic efciency

Advancement of care by building Dynamic efciency Centers of Excellence


45

Annexure 1: Methodology for developing the demand model Demand model estimates for 2021–22 (For aggressive case) 1

Total health care expenditure in India (2021–22) under UHC Health care expenditure as % of GDP (2021–22)

1.50% Public expenditure 4.50%

Private expenditure (out of pocket)

Source: EY Analysis

Supply side requirements

2

Physical infrastructure Hospital beds To cater to the increased hospitalization rate of 5.5% by 2021–22

3

46

Additional need

11.5 lacs

Physical infrastructure Doctors To achieve the WHO norm of 1 doctor per 1,000 population by 2029–30

9 lacs

Specialists To achieve the targeted average of 0.3 specialists per bed by 2021–22

3.4 lacs

Nurses and midwives To achieve the recommended norm of 3 nurses per doctor by 2021–22

13.6 lacs

Medical seats To be added by 2018 to achieve the WHO norm of 1 doctor per 1,000 population by 2029–30

20,000


1 Public health care expenditure estimates by 2021–22 Public health care expenditure in India In-patient (IP)

Out-patient (OP)

Private

1

2

Public

3

4

Additional expenditure by the government

4

Under UHC Expenditure head

A

In-patient expenditure

B

Out-patient expenditure

C

Additional government spend

Expenditure head

Value (% of GDP)

+

1.34%

1

3

This refers to the demand model in the subsequent pages.

1.84%

2 4

Comments

+

5

Total public expenditure (A+B+C)

1.30%

This refers to the current government expenditure on primary, promotive, different schemes initiated by the government, as well as operating and other expenses of the running public health infrastructure. There could be an overlap to the extent of 0.3%–0.4% of GDP between (A) and (C), since a public facility treating an in-patient case can be reimbursed from the UHC fund pool as outlined under UHC. However, the additional operating expenditure that the government may incur on account of strengthened public infrastructure could partially offset the overlap.

~4.5%

Source: EY Demand Model and Union Budget and Economic Survey 2011–12

India GDP projections for 2021–22 •

Ination has been projected at 9%. The average ination of 2004–05 to 2009–10 is based on the data from the National Economic Survey.

•

The real GDP growth rate has been projected at 7% from 2011 to 2022. The average growth rate from 2004–05 to 2009–10 is based on the data from the National Economic Survey.

•

The GDP growth rate for 2011–12, as indicated in the exhibit below, is sourced from the Press Note – Revised Estimates of Annual National Income, 2011–12 and Quarterly Estimates of GDP, 2011–12, Press Information Bureau, Government of India. Health care expenditure as % of GDP (2021–22)

421 82 2011-12

2021-22


47

A Total in-patient expenditure in 2021–22 In order to estimate the total in-patient expenditure during the next decade (2021–22), the following has been projected: a.

Total hospitalization cases by 2021–22

b.

Cost of hospitalization (ARPP) in 2021–22

In-patient health care expenditure estimates in 2021–22 INR 5.66 lac cr

1.34% of GDP

Hospitalization rate x Indian population 5.5%

x

3% 2009-10

135 cr

Cost of hospitalization – ARPP (INR) x

75,935

5.5%

32,340

2021-22

2009-10

Source: Household Consumption of Various Goods and Services in India, NSS 66th Round, NSSOs

Basis of estimation:

With the implementation of UHC by 2021-22, access to health care is expected to improve across all sections of population with improved affordability. Accordingly, the overall hospitalization rate is likely to mirror the hospitalization rate of the top 10% of the population (highest decile/class based on monthly per capita expenditure), assuming this class has access to and can afford to fulll most of its health care requirements.

Cost of hospitalization has been estimated ailment-wise on diseases covered under RSBY and the Aarogyasri scheme. This cost has been determined on the basis of the insurance claim value of RSBY, private insurance claims reported by IRDA, and Aarogyasri rates. This has been projected for 2021–22 by adjusting for:

Hospitalization rate of the highest MPCE class

Based on NSSO’s 66th and 60th Round data, the top MPCE class has indicated a CAGR increase of 0.8% in hospitalization rate (4.9% in 2005 to 5.1% in 2010). It is assumed that hospitalization rate is likely to continue growing at the same rate and accordingly the hospitalization rate for the top MPCE classes in 2021–22 is estimated at 5.5% .

•

1.

Shift in the disease burden of communicable and noncommunicable diseases

2.

Increase in affordability due to UHC coverage

1.

Change in the method of costing of reimbursement rates from marginal to the total costing method

2.

Administration costs related to claims administration, processing and disbursement

3.

Medical inationKey reasons for growth in hospitalization rate till 2021–22:

Change from marginal to the total costing method for reimbursement rates under UHC

1

Key reasons for growth in hospitalization rate till 2021–22:

•

Shift in disease burden

1 •

•

•

2

The impact of the shift in disease burden toward noncommunicable diseases is expected to contribute to 0.2% additional hospitalization. The methodology adopted: Change in prevalence rates (NCHMH and NHP estimates) for four non-communicable diseases: (cardiovascular, oncology, diabetes and neurological disorders), and seven communicable diseases: acute respiratory disorders, acute diarrhoea, malaria, tuberculosis, enteric fever, pneumonia and viral hepatitis were taken to represent individual groups. Hospitalization rates for the above diseases taken from the NSSO 2004 morbidity data and adjusted for changes in prevalence in 2020 Demand model estimates for 2021–22 (For aggressive case)

•

2

Under social insurance schemes in India, hospital package rates are typically negotiated on a marginal costing basis. As such, in a UHC scenario, reimbursements to hospitals may have to be worked out on a total costing basis to encourage network expansion/upgrades among providers. The marginal to total cost conversion factor of 1.35 has been considered to arrive at the estimates. Program administration cost

•

For the purpose of the administration of the scheme, administration expenses to the extent of 20% of the hospitalization cost have been factored

3

Medical ination •

An ination rate of 9% has been factored in to project hospitalization costs in 2021–22 (based on the average of ination rates between 2005 and 2010 — Union Budget and Economic Survey 2011–12)

The implementation of UHC is expected to address the affordability issue regarding the access of quality health care across all deciles of the Indian population. Accordingly, hospitalization rates for the other nine deciles has been

assumed to grow up to 5.5%.

48

2021-22

Source: EY analysis

Basis of estimation: •

75,935


B

Total out-patient expenditure in 2021–22 To estimate the total out-patient (OP) expenditure during the next decade (2021–22), the following model has been considered with estimates for per capita OP spend per month in 2021–22:

Out-patient health care expenditure 2021–22 INR7.74 lacs cr

1.84% of GDP

Indian population

Per capita OP spend per month (INR)

135 cr

x

x

12

INR478 46 32,340

478

2009-10

2021-22

Source: Household Consumption of Various Goods and Services in India, NSS 66th Round, NSSOs

Basis of estimation:

Considering per capita OP expenditure in 2009–10 of INR46 per month (NSSO 66th Round) as base, the following growth factors have been considered to estimate OP expenditure per capita per month in 2021–22.

1

Increase in the number of OP cases per capita

Increase in number of OP cases per capita: Due to the increase in disease burden and improvement in affordability, the number of OP visits per capita is likely to increase. The total number of OP cases is estimated to rise from 240 cr cases (2011) to 560 cr cases. (2022) Parameter

FY’09

Number of households reporting OP cases per 1000 households

Total OP cases (cr)

Average number of OP visits per capita

2

FY’22 E

670 (per month)

–

240

560

2

4.2

Remarks

NSSO 66th Round OP:IP ratio (based on NSS 66th Round 2009-10) has been used to project OP cases from the IP demand as estimated in A above OP cases/Population FY21–22: 560/135= 4.2

Administration costs

For the purpose of administration of the scheme, administration expenses to the extent of 20% of the OP costs have been factored in. 3

Administration costs

Program compliance costs to the extent of 20% of the OP costs have been considered to account for:

4

1.

Managing higher xed costs under UHC (technology requirements, manpower, support overheads)

2.

Compensating providers for increased nancial transparency and tax compliance (This increased cost will be offset for the government through higher tax collections due to transparent provider reimbursement models under UHC.)

Ination rate

An ination rate of 9% p.a. has been factored in to project the OP cost per capita in 2021–22.


49

2 Estimation of physical infrastructure 1.

Estimation of number of beds required Based on the estimated hospitalization rate projected for 2021–22 and assuming the current level of ALOS (~8 days) and bed utilization (72%), the total beds requirement has been determined as: Estimated number of beds in 2021–22 = (Current bed density in beds per 1,000 population basis) X (total population) X [(estimated hospitalization rate in 2021–22) / (current hospitalization rate in 2010–11)]

Estimation of number of beds according to base and aggressive scenarios:

Year

Number of beds required to cater to higher

Number of beds required at current bed density to cater to the increase in population

Population (crores)

hospitalization rates (in lacs)

Base case

(in lacs)

2021-22

135

12.2

16.5

Aggressive case 22.4

Source: EY analysis 2.

Estimation of number of beds by type of care (2021–22) Number of beds by secondary and tertiary care facility has been determined as below: Number of beds required for secondary/tertiary care = (Number of secondary/ tertiary care in-patient cases) / [365 X (bed utilization %)/ (ALOS)] To determine the number of secondary and tertiary care cases, it has been assumed that of the total number of in-patient cases, around 80% are secondary cases and 20% are tertiary care cases.

Accordingly, the number of beds required by type of facility is: Hospitalization cases (crores)

Bed occupancy ratio (%)

Number of beds required (lacs) Base case

Aggressive case

Base case

Aggressive case

ALOS (Days)

Secondary

4.5

6.2

7.9

72%

13.7

18.7

Tertiary

0.9

1.2

7.9

72%

2.8

3.7

Type of care

Source: EY analysis

50


3 Estimation of human resources for health

Estimation of number of doctors required based on •

Current pool of doctors

•

Number of doctors to be added every year based on the existing number of medical seats (i.e., 43,000 in 2012 as per the Medical Council of India)

•

Target doctor density of 1 per 1,000 population aspired to be achieved by 2030

Considering a time frame of six years for the addition of a new doctor from a new medical seat, the addition of 5,000 seats each year from 2015 to 2018 (i.e., 20, 000 total seats) would be required to achieve the desired doctor density by 2030. Key assumptions: •

Existing number of doctors has been considered to be 6 lacs (0.52 beds per 1,000 population).

•

2% of doctors existing at the end of every year are excluded to account for attrition (death, retirement, drop-outs or migration).

•

All medical seats added are spread over four years (2015–18) and bulk additions have not been considered Year -> Parameter

2011

2015

2020

2025

2030

Population (Cr)

119

125

133

139

146

Number of doctors as per WHO Norm (1 per 1,000)

11.9

12.5

13.2

13.9

14.6

6.23

7.39

9.02

10.66

12.3

Doctor density (per 1,000)

0.52

0.59

0.68

0.77

0.84

Number of doctors after addition of 20,000 seats between 2015–18

6.23

7.39

9.31

12.1

15.1

Doctor density (after seat addition)

0.52

0.58

0.70

0.87

1.03

(lacs)

Number of doctors with existing capacity and doctor pool (lacs)

Source: EY analysis


51

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“Household consumption of various goods and services in India,” NSS 66th round, NSSO, 2010.

2.

“Fostering quality health care for all,” EY-FICCI report, 2008.

3.

“Fostering quality health care for all,” EY-FICCI report, 2008.

4.

“Morbidity, health care and condition of the aged,” NSS 60th Round, NSSO, 2004.

5.

Fostering quality health care for all,” EY-FICCI report, 2008.

6.

“Universal Health Coverage for India,” High Level Expert Group report, Instituted by Planning Commission of India, November 2011.

7.

“Total health care expenditure as a % of GDP,” World Bank website, www.data.worldbank.org/indicator, accessed 1 August 2012.

8.

“Public health care expenditure as a % of GDP,” World Bank website, www.data.worldbank.org/indicator, accessed 1 August 2012.

9.

“Nutraceuticals: Critical supplement for building a healthy India,” EY-FICCI report, 2009.

10. “India Micronutrient Initiative Plan – 2007-11,” EY-FICCI report, 2006; EY analysis. 11. “What are the dimensions of the under-nutrition problem in India?,” World Bank website, http://siteresources.worldbank.org/SOUTHASIAEXT/ Resources/223546-1147272668285/undernourished_chapter_1.pdf, 2005; “Nourishing our future – tackling child malnutrition in urban slums,” Dasra, http://www.dasra.org/sites/default/les/NOURISHING%20OUR%20FUTURE.pdf, 2010. 12. “Economic impact of inadequate sanitation in India,” World Bank website, http://water.worldbank.org/publications/economic-impactsinadequate-sanitation-india-inadequate-sanitation-costs-india-rs-24-tr, 2009. 13. “Performance Trends and Policy Recommendations - An evaluation of Mass Health Insurance Scheme of Government of India,” RSBY working paper, September 2011. 14. EY analysis 15. EY analysis 16. “Infrastructure,” AYUSH website, www.indianmedicine.nic.in, accessed 1 August 2012. 17. “Household consumption of various goods and services in India,” NSS 66th round, NSSO, 2010. 18. “Medical Devices market in India,” Netscribes research, 2010. 19. “The Health care imperative: Lowering costs and improving outcome,” Workshop series summary, Institute of Medicine, 2009. 20. “Bulletin on Rural health statistics India,” Ministry of Health and Family Welfare, 2011. 21. EY analysis. 22. “Public health care expenditure as a % of GDP,” World Bank website, www.data.worldbank.org/indicator, accessed 1 August 2012; EY analysis. 23.

EY analysis.

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52


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61. “Background paper — Improving health system efciency as a means of moving towards universal coverage,” World Health Organization website, http://www.who.int/healthsystems/topics/nancing/healthreport/28UCefciency.pdf, 2010. 62. “Improving health system efciency as a means of moving towards universal coverage,” World Health Organization website , http://www.who. int/healthsystems/topics/nancing/healthreport/28UCefciency.pdf, accessed 1 August 2012. 63. “Health nancing reform in Kenya – assessing the social health insurance proposal,” World Health Organization website , http://cdrwww.who. int/health_nancing/documents/samj-kenya_reform.pdf, February 2007. 64. “Performance Trends and Policy Recommendations: An Evaluation of the Mass Health Insurance Scheme of Government of India,” RSBY Working Paper, September 2011. 65. Discussions with industry players. 66. “Household consumption of various goods and services in India,” NSS 66th round, NSSO, 2009-10; “Employment and Unemployment situation in India,” NSS 66th round, NSSO, 2010; EY analysis. 67. EY analysis. 68. EY analysis. 69. “World Health Statistics,” World Health Organization website , http://www.who.int/gho/publications/world_health_statistics/EN_WHS2012_ Full.pdf, 2012. 70. “Fostering health care for all,” EY-FICCI report, 2008. 71. “National Health Prole,” Central Bureau of Health Intelligence, 2010. 72. “World Health Statistics,” World Health Organization website , http://www.who.int/gho/publications/world_health_statistics/EN_WHS2012_ Full.pdf, 2012. 73. “Universal Health Coverage for India,” High Level Expert Group report, instituted by Planning Commission of India, November 2011. 74. Jishnu Das & Jeffrey Hammer, “Money for nothing: The dire straits of medical practice in Delhi, India,” Journal of Development Economics, May 2007. 75. “Universal Health Coverage for India,” High Level Expert Group report, instituted by Planning Commission of India, November 2011.

54


List of abbreviations AICTE

All India Council for Technical Education

IVF

In Vitro Fertilization

AIIMS

All India Institute of Medical Sciences

JCI

Joint Commission International

ALOS

Average Length of Stay

MCI

Medical Council of India

ANM

Auxiliary Nursing Mid-wives

MMR

Maternal Mortality Rate

AYUSH

Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homeopathy

MoT

Ministry of Tourism

MP

Madhya Pradesh

B.Sc.(N)

Bachelor of Science (Nursing)

MPCE

Monthly Per Capita Expenditure

BDS

Bachelor of Dental Surgery

NABH

National Accreditation Board for Hospitals

BOT

Build-Operate-Transfer

NCMS

New Cooperative Medical Scheme

BPL

Below Poverty Line

NIPS

National Institute of Paramedical Sciences

BPMT

Bachelor in Paramedical Technician

NRHM

National Rural Health Mission

CGHS

Central Government Health Scheme

NSSO

National Sample Survey Ofce

CHC

Community Health Center

NUHM

National Urban Health Mission

CME

Continuing Medical Education

OoP

Out-of-pocket

CoE

Centre of Excellence

OP

Out-patient

DALY

Disability-adjusted Life Year

PHC

Primary Health Center

DRG

Diagnosis-related group

PPP

Public Private Partnership

ECHS

Ex-Servicemen Contributory Health Scheme

R&D

Research & Development

EHR

Electronic Health Records

RAS

Rajiv Gandhi Aarogyasri Scheme

EMR

Electronic Medical Records

RSBY

Rashtriya Swasthya Bima Yojana

ESIS

Employee State Insurance Corporation

SC

Sub-Center

FFS

Fee-for-service

SEZ

Special Economic Zone

GDP

Gross Domestic Product

TN

Tamil Nadu

GIPSA

General Insurers Public Sector Association

UHC

Universal Health Coverage

HLEG

High Level Expert Group

UT

Union Territory

IMR

Infant Mortality Rate

VAT

Value Added Tax

IP

In-patient

WHA

World Health Assembly

IRR

Internal Rate of Return

WHO

World Health Organization

Name of states AP

Andhra Pradesh

KN

Karnataka

MP

Madhya Pradesh

TN

Tamil Nadu

UP

Uttar Pradesh

WB

West Bengal


55

Acknowledgements FICCI Healthcare Committee members

FICCI team

Ms Sangita Reddy Chairperson, Healthservices Committee and Executive Director-Operations, Apollo Hospitals Group

Ms Shobha Mishra Ghosh Director, FICCI

Dr Nandakumar Jairam Chairman & Group Medical Director, Columbia Asia Hospitals India

Sidharth Sonawat Assistant Director, FICCI

Dr Narottam Puri Chairman-NABH and Advisor-Medical, Fortis Healthcare Ltd Mr A Vijay Simha P artner - Medical Technology, Vita Pathfnders LLP Mr Rajen Padukone CEO, Manipal Health Enterprises Mr Girish Rao Chairman, Vidal Healthcare

Dr Nishant Jain Deputy Programme Director, Indo-German Social Security Programme, Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH| GIZ India Dr. Priya Balasubramaniam Kakkar Director- PHFI Universal Health Care Initiative Public Health Foundation of India (PHFI) N Srikant CEO Aarogyasri Health Care Trust Sanjay Datta Head-underwriting and claims ICICI Lombard General Insurance Co Ltd Dr Krishna Reddy CEO Care Hospitals

Dr C M Gulati Editor - Monthly Index of Medical Specialties (MIMS)

56


EY project team Core team Hitesh Sharma Murali Nair Aashish Kasad Sumit Goel Kaivaan Movdawalla Srimayee Chakraborty Ashish Rampuria Parth Patel Bilal Shaikh Chhavi Bhandari Dr. Rahul Nigam

Writing and editing assistance Vibhuti Raghuvanshi Gunjan Mansukhani

Design and layout Jayanta Ghosh


57

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