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Mainstream, VOL LX No 36 New Delhi, August 27, 2022

India’s Public Healthcare in the 21st Century: New Institutional and Financing Architecture | Govind Bhattacharjee

Friday 26 August 2022

by Dr Govind Bhattacharjee

Abstract

The public healthcare system in India is today based on an insurance model that only takes care of the curative healthcare needs of vulnerable sections by subsidising the cost of their treatments provided by private healthcare providers who operate in a largely unregulated market. Such a model tends to become financially unsustainable and cannot be supported by tax revenues alone. The rest of the population depends entirely on private providers which creates significant strains on household finances. To address these problems, a universal public healthcare system for every citizen is a sine qua non. A survey of public healthcare systems across the world shows that a sustainable model of universal public healthcare system has to be based primarily on a robust public healthcare infrastructure which India lacks, to be supplemented by private healthcare providers. 

Drawing upon global experiences, the paper argues that for India to have an efficient and cost-effective universal healthcare system, several constitutional, structural and administrative reforms are needed, starting with the explicit recognition of health as a fundamental right in the Constitution and moving it from the State List into the Concurrent List. This has to be followed by creating a centralised, GST Council-like institution represented by all stakeholders — centre, states, industry as well as community - that will be funded jointly by the centre and the states. This body will unify and deliver all healthcare services on a pan-India basis, by standardising and improving the public healthcare infrastructure. Every working citizen should be made liable to make a mandatory contribution towards health insurance. Any gap in the system can then be addressed by the private healthcare providers. 

Keywords: Health Insurance, Universal Public Healthcare, Private Healthcare Providers, Healthcare Financing, Healthcare Reforms, GST Model

(I)

Health and education remains are the two most important responsibilities of any government. But the Indian state has performed rather poorly in providing quality healthcare services to its citizens even after 75 years of independence. Indeed, the landscape of our public health sector closely mirrors our public education sector, both of which are littered with a few islands of excellence surrounded by a vast ocean of largely dysfunctional institutions. In the health sector we have the AIIMS, ICMR, PGIMR, etc. side by side with the state hospitals which lack resources, capacity and administration - and also imagination - to address the healthcare needs of people. Both sectors represent stark failures of our public policies since independence. The raging pandemic seemed to have ushered in the hope that at last our perennially neglected and underfunded public healthcare system was poised to get higher priority and more budgetary allocations. Alas, that hope was only short-lived; once the pandemic has waned, our traditional ad-hocism has returned again.

Our Dysfunctional Public Healthcare System

Health is a state subject under the Constitution and healthcare is financed through taxes, though the Centre also has some responsibilities in respect of medical education and epidemic, etc. Like education, health has never got the allocation it deserves. The total expenditure made by the Centre and the states on health remained consistently below a meagre 1 percent of GDP all throughout; it rose marginally to 1.3 percent in 2020-21 due partly to the contraction of GDP in that year. In that year, Indian states had spent a total of Rs 42.1 lakh crore, of which only Rs 2.16 lakh crore went to health, while of the total Central expenditure of Rs 34.26 lakh crore, only Rs 38000 crore went to health, excluding Rs 39000 crore transferred to the states on centrally sponsored health schemes. Central expenditure on health in 2021-22 rose to almost Rs 83000 crore, and has remained at that level even in the current fiscal.

Further, any new measures to improve funding also get subverted due to other pressures. One example is the Health Cess payable on income tax. In the 2018-19 budget, a cess of 1 percent on the income tax was introduced in addition to the existing 3 percent cess on education to finance rural healthcare for BPL families. The idea behind cesses was to enhance outlays for these crucial sectors needing enhanced funding, but the government has actually utilised this cess to finance their existing healthcare expenditure rather than expanding it. The share of health in total government expenditure even now remains at the level of 2018-19 when these cess was introduced, and the cess has largely substituted instead of adding to normal outlays. In 2017-18 budget, the allocation for health was 2.2 percent of total expenditure without any cess. In the current budget (FY 2023), allocation of the same 2.2 percent of total expenditure would have exceeded Rs 88,000 crore, as against the actual allocation of just Rs 83,000 crore including the cess-funded portion. [1] The cess, rather than topping up the health expenditure as intended rather helped the government to cut down on budgetary support, just like in education.

The allocation for public healthcare becomes important in view of the fact that most Indians shun the public health services due to their decaying state. As per the latest NSS survey on health (75th round, 2017-18), about 66 percent of India’s population receive treatment from private hospitals or clinics - only 33 percent of the rural population and 26 percent of the urban population avail treatment from public hospitals. This means the poor overwhelmingly depend on private healthcare and risk being pushed deeper into poverty as the private healthcare sector is almost completely unregulated and often charges usurious prices. The survey found that the average medical expenditure per hospitalisation case was seven times costlier than in public hospitals, yet most poor people preferred private hospitals due to the dysfunctional state of public hospitals which are plagued with long queues, absence of specialists and medicines, non-functional equipment, etc. More than 85 percent Indians did not have any health insurance cover till 2018 - Government health schemes covered just 13 percent of rural and 9 percent of urban population. It was to address this colossal gap that the Union Government had launched the Pradhan Mantri Jan Aarogya Yojana (PMJAY) as part of its flagship Ayushman Bharat initiative to extend an annual insurance cover of Rs 5 lakh per family to 10 crore households, or roughly 50 crore people. Till November 2021, 2.4 Crore hospitalizations costing more than Rs. 28300 Crores have been authorized under PMJAY, a huge amount spent only on treatment, without adding to the exiting public health infrastructure. The infrastructure part is addressed by Ayushman Bharat Health Infrastructure Mission, budgetary allocation for which in 2022-23 is Rs 5155 crore, while that for PMJAY is Rs 6412 crore. No doubt, the Ayushman Bharat policy intervention is a boon for the poor families but comes at a high cost and addresses only one part of the malaise, leaving the other part, regulation of private healthcare, completely unaddressed. [2]

A comparison with colonial times would be interesting. Under the colonial empire, India had only 21.25 lakh beds, less than one per thousand people, one doctor for 6300 people and one nurse for 43000 people. [3] In 1946, a Government appointed Committee led by Sir Joseph Bhore submitted a comprehensive report that constituted the first template of our health policy and shaped our approach to health even after independence. Recognising the underlying poverty and malnutrition, the report delinked healthcare from the ability to pay: “No individual should fail to secure adequate medical care because of an inability to pay for it.” The Report was widely debated in the Constituent assembly on allocation of functions between the Centre and the states and in the implicit recognition in our Constitution that right to health is integral to the right to life. Healthcare was addressed initially through the five-year plans, and a health policy was adopted only in 1983, which aspired to cover all aspects of health while emphasising upon the establishment of a comprehensive primary health care system reaching out to the remotest areas, and the setting up of a highly dispersed network of primary health care services linked with extension and health education.

In a significant shift from this policy and diluting the role of the state, in 1993, the government resolved to limit the scope of public expenditure only for preventive healthcare and epidemic control, while leaving the role of curative healthcare to the private sector. While the shift was welcome, a robust regulatory architecture to prevent exploitation and abnormal profiteering by private providers ought to have been erected, which was not done and is absent even now. The private sector was given liberal tax concessions and allotment of land at nominal costs to set up hospitals against the stipulation of free treatment for the poor. But when the hospitals actually came up availing all these concessions and continued to deny access to the poor at affordable rates, governments found themselves powerless to bring them to book. This was partly due to legal and administrative weaknesses, but mostly due to the governments’ dependence on private healthcare in the absence of their own lack of capacities. Driven by surging demand, the private healthcare ballooned; by 2002, over two-thirds of all hospitals and facilities belonged to the private sector which was running 11345 out of total 15393 hospitals in India, with 2.63 lakh beds. Of the total 22292 allopathic dispensaries, governments ran only 9856. [4]

The 2001 census reported a total population of 102 crore, with 71 crore living in rural areas. But our three-tier rural health infrastructure of Sub-Centres, Primary Health Centres (PHCs) and Community Health Centres (CHCs) could collectively ensure only 57000 beds for 71 crore rural people, or only one bed for 12000 persons. As Shankar Aiyer noted in his book The Gated Republic, it was a deja-vu moment that recalled the Bhore Committee observations about rural health status in India before independence. It is almost as if the state has abdicated these responsibilities and left it to the private sector which has flourished. The private hospital market is estimated to be worth Rs 5 lakh crore and the private sector accounts for 75 percent of all hospitals and 40 percent of our total bed capacity. KPMG estimates that the private healthcare sector accounts for 82 percent of the net value of healthcare market. In contrast, in 2017, there were 21403 government hospitals with 2.65 lakh beds for nearly 900 million rural population, making it one bed for 3300 persons; in the colonial times we had one per thousand people. In fact, there was no alternative but to fall back on the private sector for extending healthcare to citizens. [5]

Lack of adequate funding has always plagued the sector. India’s share of health expenditure in GDP at a meagre 1 percent remains among the lowest in the world, and far below the world average of 5.8 percent, as per World Bank data for 2018. Our neighbours China and Bhutan spend respectively 2.9 percent and 2.6 percent of their GDP on health; even Nepal, Sri Lanka and Pakistan spend 1.1 percent - not to speak of the OECD countries’ average of 7.6 percent. Our woefully inadequate health expenditure is reflected in our low international raking in respect of almost all health indicators. A Lancet study in 2018 had placed India at 145th position among 195 countries in terms of quality and accessibility of healthcare, below China, Bangladesh, Sri Lanka and Bhutan. An Oxfam survey in 2020 found that India’s healthcare budget was the fourth lowest in the world. [6]

Poor funding has led to poor capacity and poor quality of healthcare. It is a shame that even after 75 years of independence, nearly 8 lakh children die every year before they reach the age of five and 31 percent of children under 5 — nearly 4.8 crore — suffer from stunted growth due to malnutrition. [7] There are also administrative problems like absenteeism of healthcare professionals in the PHCs, acute shortage of medical personnel, inadequate number of seats for undergraduate and postgraduate medical education, inadequate research infrastructure, perennial neglect of rural healthcare, etc.

 (II)

Our taxpayer-financed, insurance-driven model of private healthcare for the public is not only expensive and wasteful, but also amoral. Public policy calls for state intervention when there is a market failure, of which two major causes are existence of a monopoly or a cartel, and asymmetry in information between the buyer and the seller, both of which characterise the largely unregulated private healthcare market in India. There are clear evidences of cartelisation as most private healthcare services are priced similarly regardless of their actual costs. For example, before February 2017, a bare metal stent (BMS) used to cost Rs 45,000 and the drug eluting stent (DES) used to cost Rs 1.21 lakh before the National Pharmaceutical Pricing Authority (NPPA) put a cap of Rs 8,261 and Rs 30,080 for the BMS and DES respectively. There are countless examples of such exorbitant pricing. Pharmaceutical companies in India, like elsewhere, constitute one of the strongest lobbies and determine market price of their products regardless of government regulations and guidelines, and governments are powerless to act against them. Besides, in the absence of state capacity, the market power of the private players cannot be curtailed by regulation alone.

As regards asymmetric information, when a private doctor prescribes an expensive diagnostic test, the patient has no way of knowing if that test was really needed for treatment or was being prescribed only to get more business for the laboratory in exchange for a payback which is a common practice, just like the private hospitals and nursing homes putting a target for each doctor to generate income by prescribing drugs, steroids, procedures and even operations that are completely unnecessary. The state not only exercises no control on such unethical behaviour, but indirectly encourages the same by driving patients to avail their services through taxpayer-financed insurance or subsidy. [8]

Before proceeding further, it would be instructive to review how governments discharge their healthcare responsibilities in different parts of the world and how they finance their healthcare expenditure in a sustainable manner. Providing universal healthcare is the norm not only in the developed world but also in many emerging economies and different countries have achieved this goal through a combination of innovative policies and strategies. Global experiences in this regard, especially in the advanced countries, may offer valuable insights for policy makers in India. In developed countries, healthcare systems are largely based on insurance for preventive and curative healthcare, provided by a judicious mixture of both public and private healthcare institutions, in a way that the vulnerable sections of society are well protected, with most of the state funding are directed towards them. All these systems also operate in a highly decentralised manner for efficiency.

France

Within the European Union (EU), France spends, around 11.5 percent of GDP on healthcare. This allows it to offer a very high quality healthcare through its national system known as ProtectionUniverselle Maladie or PUMa. Under it, health insurance coverage is available to all citizens regardless of age or income levels, and healthcare services are provided by an integrated network of public and private providers that include general practitioners, specialists, and hospital treatment. While citizens are covered through mandatory health insurance contributions, private insurance is also optionally available for seeking additional coverage. The overall responsibility for administering the public healthcare system rests with the Ministry of Social Affairs and Health (Ministere des Solidarites et de la Sante), while primary and secondary healthcare services are delivered by the different healthcare providers. The focus remains on preventative healthcare, including addiction prevention, regular medical check-ups, promotion of physical activity and healthy food habits. Government-funding covers more than 75 percent of the expenditures on health, covering between 70 and 100 percent of all healthcare costs of citizens. Low income and long-term sick patients receive full coverage. [9]

From the age of 16, all citizens must choose a primary care physician (médecin traitant) who will provide referrals as part of the “coordinated care pathway” system, something like the British National Health Service. The primary care physician’s role is to keep the patient’s personal medical records up to date, prescribe further medical investigations, and refer the patient to hospital services or specialists, with expenses being reimbursed at prescribed standard rates — a feature similar to our CGHS. Patients may see a doctor other than their primary care physician only in case of a medical emergency, his unavailability or when the patient is far from home. [10]
All residents are required by law to have some form of health insurance, whether public or private. Households having incomes below a certain threshold may be eligible for free complimentary health insurance coverage (La complémentaire Santé SolidaireorCMU-C) or financial assistance in taking a supplementary private health insurance (Aide pour une Complémentaire Santé or ACS). The healthcare costs are funded partly by the obligatory contributions for social security (Sécurité Sociale); these are usually deducted from salary; employers also pay a contribution, usually higher than the employee contribution. The patient is generally required to pay a small part of their medical expenses (ticket modérateur) out of pocket, which may even be exempted depending on conditions like long-term illnesses etc. Private practitioners are not allowed to charge upfront payments, they receive their payments directly from the government or health insurer. Similarly, citizens with public insurance can access most private hospitals. The Social Security Financing Law, 2018, requires 7 percent employer’s health-maternity-disability-death contribution on yearly salaries not exceeding 2.5 times the French minimum wage. [11]

Germany

Unlike the French, the German healthcare system is operated by many institutions and players, but like the French system, is based on compulsory insurance. Institutions responsible for running it includes associations and representatives of various providers and professions, health insurers, regulatory bodies, the Federal Ministry of Health, patient organizations and self-help groups. Healthcare cost is financed mostly by the insurance premiums paid by employees and contributions from their employers, while tax revenues makes up for the rest. Every citizen whose gross earnings are below a certain fixed minimum threshold is required by law to have statutory health insurance (gesetzliche Krankenversicherung — GKV). One who earns more than that threshold can opt for private insurance (private Krankenversicherung — PKV). While insurance premiums are based on income levels, everyone has an equal right to medical care and to receive wages when sick, regardless of income. This makes the healthcare system a progressive one, with the rich and the healthy subsiding the healthcare costs of the poor and the sick. The insurance premiums are calculated based on a percentage scale up to a certain income level (Beitragsbemessungsgrenze); anyone earning more pays the same maximum premium. [12]

The Federal Ministry of Health (Bundesministerium für Gesundheit — BMG) is responsible for policy-making at the federal level including regulations for self-governing activities within the healthcare system, while the delivery of healthcare is the responsibility of self-governing bodies. The Federal Joint Committee (Gemeinsamer Bundesausschuss or G-BA) is the highest such entity of self-governance within the statutory health insurance system, which is also responsible for quality assurance. It includes members representing doctors, insurers, hospitals and patients and makes all decisions regarding insurance coverage. Outpatient care is provided primarily by self-employed doctors, and most of them have a statutory health insurance accreditation (Kassenzulassung), which allows them to treat anyone with statutory health insurance. The first line of care is provided by the family doctor (Hausarzt) which includes general practitioners, interns and paediatricians; they can refer patients to a specialist for particular medical problems. [13]

Sweden

Decentralisation marks all well-functioning healthcare systems across the globe. One such system belongs to Sweden, where life expectancy of 82 years is among the highest in the world. Sweden follows a highly decentralised healthcare system with its 21 regional councils and about 290 local councils or municipal governments discharging most of the primary healthcare responsibilities. These regional councils are political bodies whose representatives are elected by region’s residents every four years on the same day on which national general elections are held. Healthcare in Sweden is regulated by the Health and Medical Service Act, which mandates the central government to prescribe guidelines for health and medical care, while the National Board of Health and Welfare (Socialstyrelsen) develops standards to ensure good health and social welfare for the population. Maternal mortality in Sweden is among the lowest in the world: fewer than 3 out of 1,000 babies and fewer than 4 women out of 100,000 die during childbirth, and one very important reason for this is the role played by professional midwives, who have significantly reduced mortality among women in childbirth. [14]

Sweden spends 11 per cent of GDP on healthcare. Bulk of the healthcare costs are paid for by taxes and contribution from the national government, with very high tax levels (top marginal income tax rate being 57 percent). Patient fees cover only a small percentage of costs. Both public and private healthcare providers exist in Sweden, governed by the same set of regulations. Regional councils buy healthcare services from private providers. Sweden also extensively uses digital healthcare solutions provided by private actors, like patient—doctor apps, etc. [15]

UK

In the UK, the National Health Service (NHS) is responsible for the public healthcare services which is free and paid by general taxation. UK spends around 8 percent of GDP on healthcare. The health insurance system in the UK is governed and guided by the NHS which funds the healthcare providers. Citizens have the option to buy private health insurance over and above the NHS, and this is typically financed by employer funded healthcare schemes. The NHS earlier lacked standards and incentives and was over-centralised; it was revamped thoroughly in 1998. Here also the actual delivery of healthcare services is decentralised and managed by ten Strategic Health Authorities and, below this, by locally accountable trusts and other bodies. The Strategic Health Authorities set national goals and priorities for health and integrate them into local plans and strategies. One of the Trusts, the NHS Primary Care Trusts, has the responsibility to improve the health of local population, to work jointly with partner agencies, hospitals and community services and to develop primary and community care services. While government funding covers 85 percent of the healthcare expenditure, the remaining 15 percent is covered by the private sector. [16]
Quality of healthcare is one of the key focus areas and for this, there are a number of regulatory bodies like the Care Quality Commission which continuously monitor and assess the quality of health services provided by public and private providers. Quality is further monitored by the Department of Health and its regional units - the ten Strategic Health Authorities. UK has a Quality and Outcome Framework, which measures the quality of healthcare delivered by general practitioners (GPs). Under this, GPs are awarded points depending on how well they are organized, how patients view their surgical experiences, whether ancillary services are offered by them, and how well they manage the common chronic diseases. GPs are then paid fees based on their earned points. Participation is voluntary, but most GPs opt in due to the opportunity for increased income. [17]

USA

Unlike in Europe where the State-funded healthcare systems draw heavily on tax revenues, in the USA, many households are left without any insurance coverage, and have to fund their own private health insurance costs. Indeed, USA has one of the costliest healthcare systems in the world. Among all the G-7 countries, it is the only one without a universal health insurance system, and also the worst in terms of access, patient safety, coordination, efficiency, and equity. The US healthcare also has age and income requirements (Medicaid or Medicare) for public healthcare coverage. [18]

The US health system is a mix of public and private, for-profit and non-profit insurers and healthcare providers. The federal government provides funding for the national Medicare program for adults aged 65 and above and for various programs for veterans and low-income people, including Medicaid and the Children’s Health Insurance Program (CHIP). States manage and pay for local coverage. Private insurance remains the dominant form of coverage and is provided primarily by employers. After the landmark Affordable Care Act (ACA) of 2010 enacted by President Obama which expended the insurance coverage, the proportion of uninsured in the population has fallen from 16 percent to 8.5 percent by 2016. Both public and private insurers operate their own benefit packages and cost-sharing structures within the overall federal and state regulations. Health insurance contributions are tax-exempt. In 2018, about 55 percent of the population was covered under employer-sponsored insurance. Most employer plans cover workers and their dependents and both employers and employees typically contribute to the insurance premiums. [19]

Public spending accounts for about 50 percent of total healthcare spending, or approximately 8 percent of GDP. While federal spending accounts for about 28 percent of total spending, states contribute the rest 22 percent. Federal taxes fund public insurance programs, such as Medicare, Medicaid, CHIP and military health insurance programs. Medicare is financed through a combination of general federal taxes, a mandatory payroll tax that pays for hospital insurance, and individual premiums.

Emerging Market Economy: Brazil

Even emerging market economies are also experimenting with decentralised and universal healthcare models to attain better health outcomes. Brazil is an emerging market economy that shares many similarities with India. The Brazilian healthcare system is based on three pivots:

  • The universal right to comprehensive health care at all levels - primary, secondary, and tertiary;
  • Decentralization with responsibilities given to the all three tiers of government- federal, state and local;
  • Social participation in formulating and monitoring the implementation of health policies through federal, state, and municipal health councils.

Brazil’s healthcare system was traditionally based on compulsory contributions by employers and employees for the private sector and government funding for the public sector employees. The system, like in India, excluded agricultural and informal sector workers, leaving the majority of the population uninsured. Health was not recognised as a constitutional right until 1988, when Brazil adopted a new Constitution after military rule. The new Constitution declared that “Health is a right of all and an obligation of the State, guaranteed by socioeconomic policies which seek the reduction of the risk of diseases and of other grievances and to the universal and equal access to the actions and services in its promotion, protection and recuperation”. The Constitution defines universal right to comprehensive care at all levels such as primary, secondary, and tertiary. [20] In India such an explicit provision is still wanting.

The current health system, conceived during Brazil’s re-democratization and known as the Sistema Único de Saúde (SUS), was created in 1988 by the new Brazilian constitution, which was expanded gradually in many incremental steps since then. In 1996, the federal government introduced an earmarked tax for healthcare on financial transactions; by 2007, it had raised a total collection of about US$ 20 billion before it was rolled back due to concerns that suboptimal utilisation of the money raised for healthcare purposes. In India also, we have a health cess levied on the income tax since the FY 2019, which has defeated its purpose, as discussed. [21]

The SUS gradually now covers every person legally living in the country, providing a universal health coverage. It is decentralized with administrative responsibilities distributed among all tiers of government, while the actual delivery of healthcare services is handled at the state and municipal levels. In a large country like Brazil, community participation is essential for success of any public policy. Community participation is a constitutional requirement at all tiers of government, and SUS ensures this through federal, state, and municipal health councils, composed of 50 percent community members, 25 percent providers, and 25 percent health system managers. Health councils and conferences deliberate on public health policies and monitor their implementation. SUS provides all types of healthcare to citizens, and sometimes to visitors also, free of cost, through a personal National Health Identification Card with medical records that allow coordination between services (a digital equivalent of this has just been introduced in India). The card can be obtained at any health centre by presenting an identity card, proof of residence, and a tax payer number. [22]

An independent private health sector also exists in Brazil, side by side with a robust public sector. Like in India, public hospitals in Brazil offer free services, and unlike in India (save a few hospitals like AIIMS etc.), provide high-quality healthcare services at the point of delivery. Private health insurance is voluntary and supplementary to the SUS. About a quarter of Brazilians have private health plans which grants them access to private hospitals, mostly through their employers who can claim such expenses as tax-deductible; Brazil spends 0.5 percent of GDP on tax exemptions for private healthcare. About 75 percent Brazilians depend solely on the SUS for all their healthcare needs. The health departments in the 5,570 municipalities largely handle the management of SUS at the local level, including co-financing, coordination of health programs, and actual delivery of health services. The SUS is financed by tax revenues and social contributions from all three levels of the government. The minimum contribution rates are defined in the law. [23]

Quality is ensured by the Brazilian Accreditation System, through the National Accreditation Organization. There is a National Patient Safety Program under the Ministry of Health, under which Patient-safety centres operate in public and private hospital services, making it mandatory to report adverse events, including inpatient falls and misapplications of medication. Regional regulatory centres coordinate patient referrals to specialized, hospital, and emergency services. [24]

(III)

Lessons and Roadmap for India

The above survey of global healthcare systems have many important lessons for India. The first and foremost lesson is that there is no alternative to a universal healthcare system in a poor, diverse and populous country like India. The need is to include everyone in a healthcare security net and reduce the heavy out of pocket expenses on health which pushes households into poverty. For this we need significant constitutional, structural and administrative reengineering of our healthcare system, discussed as follows.

Constitutional Reforms

To bring the focus back on the state’s responsibilities for health, the first requirement is to recognise the right to health as a fundamental right in the Constitution. In India, Article 21 of the Constitution guarantees a fundamental right to life and personal liberty; besides Article 47 under the Directive Principles of State Policy also enjoins upon the state the responsibility to promote public health and nutrition. The right to health is inherent to any right to life with dignity under article 21, but is not recognised explicitly in the Constitution as a fundamental right, unlike education (Article 21-A). But the Supreme Court in numerous judgments has repeatedly affirmed this position. In Bandhua Mukti Morcha v Union of India & Ors (1997), the Supreme Court interpreted the right to health to be an intrinsic part of the right to life under Article 21. In several judgments that followed, this position has been reiterated. Even earlier, in 1988, in Rakesh Chandra Narayan vs State of Bihar 1989 AIR 348, the Supreme Court had held that in a welfare state, it is the obligation of the government to provide medical attention to each and every citizen. In State of Punjab and Ors vs Mohinder Singh Chawla (1996), the apex court reaffirmed that the right to health is fundamental to the right to life under Article 21 and that the government has a constitutional obligation to provide health services. In the same year, in Kirloskar Brothers Ltd. vs. Employees State Insurance Corporation, 1996, the Court again held that preservation of human life is of paramount importance and that Article 21 imposes an obligation on the State to safeguard the right to life of every person. Again in 1998, in State of Punjab and Ors. v. Ram Lubhaya Bagga and Ors, (1998), the Court reiterated, “To secure protection of one’s life is one of the foremost obligations of the State, it is not merely a right enshrined under Article 21 but an obligation cast on the State to provide this both under Article 21 and under Article 47 of the Constitution. The obligation includes improvement of public health as its primary duty.” The 15th Finance Commission also recommended that the right to health should be declared a fundamental right, and health should be shifted from the State List to the Concurrent List, putting an obligation also on the central government to provide accessible health care for all. [25] If we reckon Article 21 as recognising health as a fundamental Constitutional right, the Indian state has miserably failed in this regard to ensure acceptable standards of basic healthcare for its citizens so far. In that sense, the right to health remains a forgotten Constitutional right.

Structural Reforms

As the survey of global systems have shown, any efficient healthcare system has to be based on decentralisation, unification and active community participation to manage all the complexity of a healthcare system in a country like India, including preventive and primary healthcare, specialised health services, pharmaceutical care, and health surveillance and management. For this we need to reduce bureaucracy, increase flexibility and increase financing..

In India, healthcare remains the primary responsibility of states which are perpetually lacking in resources and often also in imagination due to their excessive obsession with vote bank politics which divert resources from core areas like health and education to populist measures; even the Centre also indulges in this. The delivery points, the PHC, CHC, district and block hospitals and state hospitals, etc., severely lack capacity and resources. The health services and institutions also remain distributed between centre and the states - the third tier does not have enough resources even to look into sanitation and drinking water, let alone providing quality primary or secondary healthcare. The Central Government runs a CGHS which mainly serves as a referral point for its employees and pensioners to private hospitals. Due to resource constraints, the CGHS affiliated hospitals are often not reimbursed expeditiously, leading to their refusal to treat the CGHS patients. Both the Central and some state governments run identical or similar health insurance or other health schemes, without any credible assessment of their impact or viability in terms of expenditure, leading to obvious lack of synergy. Inefficiency, inequity and lack of economy characterise such a highly fragmented, leaky and almost dysfunctional system that undermines its own public healthcare institutions by encouraging an exploitative network of private hospitals and pharmaceutical companies over which the government exercises little or practically no control. The system benefits only a few at the cost of many, and create strong, entrenched vested interests.

To replace such an inefficient system by a decentralised model practiced by the advanced countries will not be easy. Decentralisation requires that public institutions become as efficient as private ones if not better- to reform our public hospitals, especially those managed by the states, by raising their standards will need extraordinary focus after so many decades of neglect and underfunding. But there has to be a beginning sometime. This government has introduced radical reforms in many crucially important areas, one of them being the GST. For reforming our healthcare system, we can also follow a model similar model to the GST model in which both the Centre and the states have voluntarily agreed to sacrifice their respective taxing powers under Schedule VII to the newly created federal body of GST Council in order to facilitate implementation of a single unified pan-India tax. I want to argue that all public healthcare responsibilities should also be transferred to a newly created centralised body, to be funded jointly by the centre and the states. Then a level of synergy can be achieved which is now absolutely missing from our decrepit healthcare system.

Delivering healthcare across the country in a decentralised manner will then be the sole responsibility of this unified body that will include representatives of the centre, states, private healthcare and pharmaceutical industries as well as the community. It can then standardise the health services that are now lacking in many respects. Through the initiatives of such a body, a robust pan-India public health infrastructure can be created to cater to the primary and secondary healthcare needs of citizens. Such a body can prescribe standards of public hospitals and monitor improvement in their infrastructure and services to make them competitive to their private counterparts. Side by side, it can create an ecosystem for the community to get proactively involved in promoting healthier living, and design an incentive structure for people to inculcate good and healthier habits.

Without quality support from public hospitals, no public healthcare system can ever be economical and cost-effective. A universal healthcare coverage will necessitate some insurance model. Presently such models like the Jan Arogya Yojana are skewed heavily towards the private sector since the public sector lacks in capacity and efficiency. Once the public network attains the necessary robustness, a level playing field will be created in which competition between public and private healthcare providers will reduce prices and increase efficiency. It will also reduce the current pressure on public finances.
As already stated, the community must be involved in preventive healthcare by promoting healthy living in society and also in healthcare surveillance through regulating, monitoring and ensuring the quality and cost of services. An appropriate set of institutions need to be created for all this by involving representatives of the community, including from the grassroots level. Quality assurance so important for any healthcare system has to be assured through a system of accreditation, both for private as well as public healthcare providers.

Administrative and Financing Reforms

Presently the healthcare is financed through central and state taxes. There being multiple demands on resources, health does not get the attention and allocation it deserves. Any new measures taken to improve funding also get subverted due to competing demands for resources from many sectors, as in the case of Health Cess discussed earlier. Since in the restructured scenario, all the financing will go to the centralised body to be created, such ad-hocism must stop and every decision must be taken in the proper spirit of cooperative federalism between the centre and the states.

There is no alternative to increasing expenditure on healthcare substantially. The very act of unifying the diverse schemes presently being run by the centre and the states can be expected to attain better synergy and efficiency, thereby saving and releasing enough funds for the expansion and improvement of existing services by plugging the leakages and avoiding duplication and wastes. The private sector also must be made accountable for the healthcare needs of their own employees and their dependents through legislation, to make them responsible for contribution towards the health insurance of their employees and their dependents - such contributions may be made fully tax-deductible as an incentive. This will take off the pressure from the government in respect of these employees. Every working citizen should be made liable to make a mandatory contribution towards health insurance, whether working for private of public employers, with the level of contributions being linked to the pay. Even the unorganised sector should be incentivised to come on board — incentives do work in public policies. It is only a question of designing a suitable incentive scheme.

Incentive schemes may also be designed to attract investment in the healthcare sector with an appropriate regulation. The idea should be to provide quality public healthcare coverage to at least 50 percent of the population including the vulnerable sections, and leave the rest to private health insurance. The CGHS can be disbanded or converted into a public healthcare utility, while needs of government employees and pensioners can be addressed through other insurance schemes, private or public.

Every family should be tied to a General Practitioner (GP) who will be the primary healthcare provider and also serve as a referral authority to specialists whenever necessary. An incentive structure can be created so that patients are not kept beyond the required time by specialists or private hospitals. Many other points can be picked up from the global best practices to be adapted to our situations.

One important area in which India is lacking seriously is the absence of effective and meaningful regulation which enables the private sector hospitals and nursing homes to fleece the public since healthcare is an area with large amounts of asymmetric information. This calls for state intervention. The need for effective regulation and for an equally effective enforcement machinery can never be overemphasised.

(Author: Dr Govind Bhattacharjee, is a former Director General at the Office of the Comptroller & Auditor General of India, is currently a Professor of Practice at the Arun Jaitley National Institute of Financial Management.)


[1“If cess is excluded, allocations for health & education shrink”, Times of India, New Delhi, Feb 06 2022

[2Bhattacharjee, Govind, “Healthier India”, The Statesman, July 13-14, 2022.

[3Iyer, Shankar, The gated republic, HarperCollins, 2020, p60.

[4Ibid, p71.

[5Ibid, p82.

[6India’s health budget fourth lowest in world: Oxfam | India News - Times of India (indiatimes.com)

[7India (IND) - Demographics, Health & Infant Mortality - UNICEF DATA;

[8Bhattacharjee, Govind, “Healthier India”, The Statesman, July 13-14, 2022.

[9The French social security system - Rates and ceilings of Social Security and unemployment contributions (cleiss.fr)

[10Ibid.

[11Ibid.

[12Health care in Germany: The German health care system - InformedHealth.org - NCBI Bookshelf (nih.gov)

[13Ibid.

[14Healthcare in Sweden | sweden.se

[15Ibid.

[16actu-uk.pdf (columbia.edu)

[17Ibid.

[18United States | Commonwealth Fund

[19Ibid.

[20BRAZIL | Summary | Columbia Public Health

[21Ibid.

[22Ibid; also Brazil | Commonwealth Fund

[23Brazil | Commonwealth Fund (Figures pertain to FY 2017)

[24Ibid.

[25Right to Health: The forgotten Constitutional mandate | CJP (Citizens for Justice and Peace)

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