Dispatch from India: Private sector responding to new health care consumers

Editor’s note: The current issue of Health Affairs released next week
focuses on health care in India and China.

As with most parameters within the Indian economy these days, the health care industry is huge but that doesn’t tell you much.

The fact is that health care in India is a broken system whose fault lines are fast being papered over by the rapidity of change, influx of big capital, drive of entrepreneurship and the relative ease of staking positions and targeting opportunity in an economy on fire. Combine that with the government’s involuntary relinquishing of idealistic heights due to resource constraints and its abysmal record and you get an industry that is overwhelmingly in the hands of the private sector. Maybe the private sector can redeem the industry after six decades with little to show by the government.

In 2006, health care spending was a little over 5 percent of India GDP,
or over $30 billion. This includes provider services, manufacturing,
and retail pharmacy, with delivery and pharmaceuticals accounting for
75 percent of the total. According to Ernst & Young, spending could well
be between 5.5 percent and 8 percent of GDP and employ 9 million people by 2009.

Currently, India has more than 15,000 hospitals (compared to about 7,000 in
the US) with over 870,000 beds. There are 162 medical colleges, about 750,000
nurses, and 500,000 physicians. But don’t get taken in by
all those numbers. As I said, India boasts big numbers, but the devil’s
in the details. Per capita expenditure is low and the share of
government in health care delivery is less than 20 percent and falling. Over
80 percent of the market, therefore, is in the private sector that is
fragmented, of varying quality, ill-regulated, and characterized by
practices that would make a US regulator pass out. The average Indian
consumer accesses these services at his own peril, unless they
happen to be in urban areas and belong to the educated middle and upper
classes to be able to discern quality differences and pay for them.

Government provision of health care in the country is largely in the
hands of the state governments, with the federal agencies limited to
family welfare and disease control programs. The former is responsible
for primary and secondary care with limited specialty care. Provider
services are through public and community health centers, district
hospitals, and individual GP practices of indifferent quality in the
rural areas; a huge network of privately-owned nursing homes providing
mostly secondary care in the semi-urban and urban areas; and a rapidly
growing clutch of deep pocketed and well-endowed private corporate
tertiary care hospitals (or, to describe them in their own words,
"super specialty") in the metropolitan areas. Of these, over 80 percent of
hospitals have less than 30 beds (often called nursing homes), about 10 percent
have between 30 and 100 beds, 5 percent between 100 and 200 beds, and 1 percent with
over 200 beds. The private corporate hospitals, not surprisingly, fall
in the 6 percent segment for the most part and compare with the best in the
world, but their share of total private ownership is about 10 percent.

Strangely for a country that is still largely poor, there has been a
rise in lifestyle diseases that has reflected on services, especially
in urban areas: cancer (2.5 million cases with 700,000 new cases every
year); diabetes (40 million cases); HIV/AIDS (5.1 million cases); TB
(14 million cases); cardiovascular, and CNS. Increasing wealth and
changing lifestyles are said to be the cause. For these and other
reasons, share of tertiary care in the total health care pie is 15 percent to 20 percent
and growing at a faster rate than the rest.

This picture would be grim if not for an ironic confluence of a
consumerist, fast food and convenience foods lifestyle on the one hand
and an image conscious, healthy lifestyle appreciation on the other. If
that sounds paradoxical, it is. The notion of health consciousness is
restricted to the white-collared middle and upper-middle classes in the
urban areas who increasingly work for large companies, both Indian and
foreign, and draw much of their aspirations from the increased wealth
and awareness. But, for a variety of reasons, bad health practices are
now spreading across the social spectrum that is worrisome. Over on the
employer side, a red-hot economy and a growing skills shortage has
meant high attrition rates and compensations that are increasingly
getting out of hand. Combine the two trends on the employer and
employee sides and you have the possibility of a heady brew: an
opportunity for employers to creatively design benefits programs with
health care forming an important part of it and for employees to take
charge of a crucial aspect of their lives and direct their consumerist,
choice-seeking, philosophy to health care.

That is still fiction, of course. We have just begun to see the
emergence of health care insurance (about 1 percent for the nation as a whole,
but about 20 percent to 30 percent among the white collar in the metropolitan centers)
and though out-of-pocket expense still forms the bulk of health care
spending in the country, there is not much of price competition even if
there is choice. Basically, one pays what is charged. In this
environment lies the possibility of congruence in interests between
employers in the organized white collar segment, empowered employees,
an insurance industry seeking targeted opportunity, and a provider
community of willing and progressive entrepreneurs sensing an
uncontested space for a branded, accredited, quality rated, concept. In
such a world, consumers are encouraged to make informed health care
decisions, shop for products and services among the multitude of
providers and payers who have opted to participate in a supermarket
setting, and intermediaries providing the important functions of
educating, mediating, and facilitating selection and delivery.

This dreamland may just have a chance in India as there are no
entrenched interests as yet unlike in the United States and, therefore,
few structural impediments to design a workable and innovative system.
Insurance is minimal but is seeking to enlarge its space; employers are
resistant to involving themselves too deeply in defraying the costs of
employee health and thereby reduce participants to becoming mere cogs
in the wheel; and consumers are becoming savvy enough to entertain the
thought of seeking value that aligns with their health care needs.
Imagine if these were dominant factors in the US of the 1950s: the
health care industry may well have evolved very differently. What the
country needs to give all this a push in the right direction are
enabling legislations that permit some kind of tax-shielded health
savings such as Medisave in Singapore or HSA in the US. In short, India
can learn from, and sidestep, the structural handicaps holding back
health care reforms in the United States.

Such a market economy of choice, quality, and price obviously will work
only with a limited population set — those of the educated middle
class. While this might seem like pampering an already well-off
segment, the idea is to let market forces work for one segment that
does not greatly need government support and thereby relieve it of
responsibilities — and release funds in the process — to focus on the
vulnerable poor.

It is important to note why India might entertain such an idea in the
first place: funding for nationwide health out of general revenues have
been miserably inept and its efforts largely bypassed by every segment
of society. Social insurance of a sort barely exists outside of a small
privileged few falling within the purview of the Employees State
Insurance Scheme
(ESIS); and private insurance, left unchecked, might
just begin to replicate the problems one experiences in the US. In the
meantime, the out-of-pocket regime flourishes with serious
repercussions to the patients and their families. In this scenario,
only the provider and manufacturer segments gain. A supermarket of
quality providers rated by neutral third parties that enables consumer
choice in service packages and price would appear to be just what the
doctor ordered.

5 replies »

  1. Even if ESI and CGHS are government backed mandatory health care service which covers central government officials ,and most of them are clerks waiting to be assistants and supervisors in their 60’s , no fun its pathetic.

  2. An innovative website relating to healthcare in India is http://www.indiahospitalbeds.org which provides information on availability of Hospital beds on any particular day at premier Hospitals in India’s metros. Obviously the general public would find it easier to refer to the information on this website than making multiple calls to different Hospitals to enquire Hospital bed availability. Even Doctors and nursing homes can refer to the information contained therein prior to recommending their patients to the specialised Hospitals when such a need arises. This is a non-commercial website created solely for the benefit of general public. Hospitals would be directly updating the information on a daily basis.

  3. Well researched article. Just to add, ESI and CGHS are government backed mandatory health care services. It covers almost all the central government officials and workers.

  4. firstly, i would like to congrtaulate you on your sincere efforts for bringing the existing health scene in limelight.
    what i wish to add in is that the commercial health and pharmaceutical sector is attracting big bees from all over the world to set up their manufacturing for direct selling here; COURTESY HEATH CAUTIOUS REVOLUTION WITH EDUCATED INDIANS.
    no wonder the 5000$ billion company in US of Vemma is rooting themselves .
    i have written more about it, would be GALD IF you may just take a few minutes to check teh link below :

  5. Thank you for this article. I am trying to read as many opinions on different health care models as possible. Most of the blogs are dealing with USA and Canada. But I believe we will hear a lot about Indian health care in the future, I really wonder which way India will choose. We in Toronto term life are naturally fans of private health insurance, but here in Canada it has no power to improve your treatment. I think India is going to be a golden mine for insurance companies…