Health Insurance in India: Is it the Way Forward?

Abstract

In India, despite the rhetoric of a publicly provided health care at affordable cost for all, an overwhelming 75% of the health care needs is serviced by the private sector. Moreover - owing to the low levels of government financing in health coupled with a lack of risk pooling mechanisms, out of pocket expenses is the predominant mode of financing. Thus the poor are largely unprotected from the risk of bankruptcy arising out of catastrophic illnesses. In fact the National Sample Survey founds that expenditure during bouts of illnesses that require hospitalization is the second major cause of people lapsing into poverty.This paper examines the case for insurance financing of health care in India.We find that in view of the fiscal constraints for government to provide universal access to free/low cost health care, insurance can be an important means of mobilizing resources, providing risk protection and perhaps, improved health outcomes. However for such an effort to be successful, it must be accompanied by appropriate systemic reforms.