Improving Financial Protection by Prepayment and Risk Pooling Reform in India – A Move Towards Universal Health Coverage

Abstract

Universal health coverage is single most powerful concept that public health has to offer an assertion made by WHO Director General Margaret Chan shows the mounting worldwide attention given to coverage – particularly in less affluent countries - as a way to reduce financial impoverishment caused by health spending, improve financial protection and increase access to key health services. Despite a lot of debate and discussions there is little consensus about how reforms should be structured in low-income and lower-middle income countries aiming towards universal health coverage. These countries including India can aspire to provide Universal Health Coverage (UHC) to their populations provided health financing systems are properly structured and managed. One of the few common key features of the trajectory towards universal health coverage is an increase in the share of health spending that is pooled rather than paid out-of-pocket by individuals. In Indian context this is specifically very true as India is currently suffering from weak and fragmented health financing system with extremely low public spending on health and catastrophic private out-of-pocket expenditures. At 1.2% of the GDP, India’s public spending on health as a proportion of GDP is bottommost in the world. The present report discusses sources of inefficiency and inequity in Indian health financing mechanisms from economics perspective. And to address them proposes a reform based on Tax based prepayment and centralised risk pooling to improve financial protection. Despite recent economic reforms in India, this low level of public health spending only signifies that health has never been assigned a due priority by Indian governments in its agenda. A direct consequence of this low public spending on health is the exceptionally high burden of private out-of-pocket expenditures (OOP), which amounts to 71% of the total health expenditure. Paid by individual households at the time of illness, it is one of the highest proportions of OOP in the world creating significant financial barriers in accessing healthcare. Financial protection against medical expenditures is far from universal. Only 10% of!households in India have at least one member covered by medical insurance as per National Family Health Survey 2005-06. India’s medical insurance sector is exceptionally weak and fragmented with plethora of discrete insurance schemes catering to different sections of society. Henceforth a reformed risk pooling mechanism that is sufficiently backed up by a reliable prepayment system is the need of the hour to reduce out-of-pocket expenditures and establish financial protection for the entire population. The present paper discusses sources of inefficiency and!inequity in!Indian health financing mechanisms from economics perspective. And to address them proposes a reform based on Tax based prepayment and centralised risk pooling tom improve financial protection.