Universal pension and health coverage: The US experience in managing pension and health systems offers rich lessons for India, a nation now at a critical juncture in shaping its socio-economic development. As India grapples with rapid urbanisation, demographic shifts, and an evolving economic landscape, it is imperative to examine these lessons closely.
The United States has constructed a robust pension system, anchored by its social security programme. This system exemplifies a progressive, universal approach where benefits are scaled according to lifetime earnings, ensuring a foundational support for retirees. The efficiency and inclusivity of this system have been its hallmarks, creating a sense of collective investment across the population.
The US is currently facing the challenges posed by an ageing population, necessitating adjustments in taxation and benefits. These adjustments predominantly impact higher-income groups and might extend the retirement age, reflecting the need for sustainable fiscal practices in pension systems.
For India, this highlights the necessity of an inclusive yet fiscally sustainable pension system. The current scenario, predominantly favouring the formal workforce, calls for a more equitable approach. Adopting a model akin to a universal or nearly universal social pension, building upon schemes like the Indira Gandhi National Old Age Pension Scheme, could offer widespread security. This should be balanced with efforts to encourage broader participation in retirement savings schemes, particularly in the informal sector, where reliance on savings alone is challenging.
The US healthcare system, largely private and employer-based, presents a complex and expensive model. While strides towards universality were made with programs like Medicare and the Affordable Care Act, the system is burdened by high costs and governance challenges. This presents a cautionary tale for India, which is making significant efforts to expand health coverage through schemes like Ayushman Bharat.
India’s journey towards universal health coverage must contend with unique challenges such as uneven access, high out-of-pocket expenses, and a burgeoning demand for healthcare services. The US experience underscores the importance of establishing a strong governance framework to manage a blend of public and private health provisions. Additionally, a focus on primary care and public health systems is vital for cost containment and ensuring broad-based access to healthcare services.
Universal pension and fiscal prudence
Both the US pension and healthcare experiences point towards the criticality of fiscal responsibility and robust governance. India’s approach to these sectors must be grounded in fiscal sustainability, ensuring that the systems are resilient and adaptable to changing demographics and economic realities.
The concept of universal coverage, both in pensions and healthcare, comes with substantial costs. For India, this involves making tough choices about where to allocate resources and how to fund these ambitious programmes. It might mean exploring new taxation models or reallocating existing resources to prioritise social security and healthcare.
While the US offers valuable insights, India’s solutions must be tailored to its unique context. The vast informal workforce, diverse population, and varying state-level dynamics require customised approaches. For pensions, this could mean developing a hybrid model that combines a basic universal pension with opportunities for additional savings. In healthcare, it might involve strengthening public health infrastructure while expanding insurance coverage and reducing out-of-pocket expenses.
As India aspires to play a pivotal role on the global stage, it cannot overlook the foundational needs of pensions and healthcare for its population. The lessons from the US, while instructive, must be adapted to India’s unique socio-economic fabric. Embracing a cautious yet ambitious approach in reforming these sectors is crucial. India’s journey towards establishing comprehensive, inclusive, and sustainable pension and healthcare systems will be a defining aspect of its socio-economic progress in the 21st century.
(Kenneth Apfel is Professor of the Practice Emeritus, School of Public Policy, University of Maryland. This article is being published in collaboration with EGROW Foundation, a Noida-based think tank.)