Regulated private hospitals, quality public sector can cut out-of-pocket healthcare spending

public health outcomes
Optimal public health outcomes require policymakers and public health practitioners to hold powerful commercial actors responsible for their actions.

By KR Antony

The need for regulation of private hospitals: The Covid-19 pandemic saw several middle-class families being pushed into poverty. The culprit here is the rise in out-of-pocket expenditure, the absence of good public health facilities, and lack of adequate insurance cover. The victims are ordinary people, especially the middle class and lower-class people who cannot afford to finance their treatment. The policy direction is clearly is in favour of the private sector, leading to the neglect of the public health system. The pandemic showed that there is a need for a course correction.

The biggest lesson from the pandemic was the need for a robust public health system. India needs to upgrade and expand its public health system on an urgent basis because it is the only option for the poor. We are witnessing high levels of privatisation and the weakening of the public health facilities. Let us discuss some fundamental questions. Whose health are we talking about? Is it the health for a few privileged? Or is it healthcare for all? When you say health for all, it is not just the quality of healthcare, but it also about equity.

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Healthcare not a marketable commodity

The other question is whether healthcare is a marketable commodity? Or is it a public good? If we agree that it is public good, then it is not a marketable commodity. A democratic country, which declared itself a socialist Republic and a welfare state, has to have a government that is for the people. It cannot leave healthcare to the private sector run by profit motive. The private sector can run for people who can afford costly healthcare. Where would the government of the people get the funds? It is run by taxpayers’ money and cannot behave like an insurance agency.

In the last decade, we were talking about primary healthcare. Primary health care has eight components and we need to focus on that. After 2000, we are talking about universal health coverage. It is a critical component of sustainable development and it is needed for reduction of poverty and social inequities. Universal health coverage cannot be achieved by a third party, and support systems like insurance packages. The government has full responsibility for it. How about universal health coverage approach to public health?

It will help when the public health system improves. People will start coming back. For example, in Kerala the utilization of the public health system was 28% in 1992. By 2020, it increased to 48%. This has happened in Tamil Nadu, Gujarat, Himachal Pradesh, and in other states where the public health system delivered the goods. Now look at the case of Bihar, you will find the opposite trend.

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Ayushman Bharat and medical insurance

The health and wellness centers are really making a difference. Ayushman Bharat had a public private partnership role, but how much of it was debatable. Universal healthcare requires some funding support and that cost has to be met by the government. It has to protect the people from financial hardships. When healthcare expenditure by the government is  low, the out-of-pocket expenditure by each individual goes up. The expenditure can push them into poverty, or selling of assets such as gold or property. This should not happen in a democratic country.

Healthcare expenses must be met from a pooled resource from healthy people. Somebody who is weak and unhealthy cannot be left to the vagaries of market forces or insurance companies. Some insurance companies have poor settlement ratio. The latest national family health survey shows that among the states, Bihar has an insurance coverage of just 14.5%, Maharashtra 20%, and Karnataka 28%. The data shows that out-of-pocket expenditure in admitted cases in private hospitals is almost seven times higher despite insurance. To avoid financial ruin of the middle class, there should be better budget allocation by the government.

The Union budget for the current year came in the midst of a pandemic crisis. All expected a big allocation for health at around Rs 80,000 crore. The budget set aside Rs 60,000 crore to the national health mission, which is making a difference in some states. It had allocated Rs 35,000 crore for Covid-19 vaccination. This amount was not utilised in time for purchase of vaccines. Globally, the proportion of health budget to the GDP is 5.99%. The demand in India is 3% of the GDP, and a steady increase to 6%. The health budget was just 1.4% of the GDP in 2009-10. It decreased to 1.3% last year. India was at 183 in the ranking of 191 nations.

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Profiteering by private hospitals

A study done by Kerala Shastra Sahitya Parishad in 2011 shows that out-of-pocket expenditure per person increased 60 times — from Rs 88 in 1984 to Rs 5,679 in 2011. Out of pocket expenditure was mainly because of the high cost of antibiotics, irrational use of diagnostics tests such as CT scan and MRI at private hospitals. According to WHO, if your out-of-pocket expenditure is more than 15 to 20% of the total, it can lead to impoverishment. And that is what has happened in India, where the share is around 61%. Even in admitted cases, PMJAY did not make much of a difference.

What happened during this pandemic? It was a market disaster. Everybody including the courts highlighted the urgent need for regulation. There was the Clinical Establishments Act from 2010 and in 11 states, it is not implemented. The Union government was lethargic in regulating private hospitals during the pandemic. Of course, there are other serious things to do, but this was a burning issue too.

The National Human Rights Commission issued two sets of health and human rights advisories. One last year during the peak of the first wave in September, and again in May 2021. It called for observance of patient rights, charter and rate capping in private hospitals and a more efficient grievance redressal system. Thanks to judicial activism, there was reservation of Covid care beds in private hospitals. This brought about a remarkable change in many private hospitals. There was regulation of prices for PPE kits, the bed charges and the ICU care in Kerala. The Delhi High Court intervened for availing medical oxygen.

Why do we need courts to intervene? It is good that they intervened to salvage the situation. This happened because there was no regulation of treatment practices through a standard protocol. This result was black marketing of Remdesivir and overuse of drugs. The pandemic experience was bad not only in India, but even globally. Italy had the same problem as the government had outsourced the entire medical care to private operators and they were not interested in public health institutions such as old age homes. They were not interested in prevention or control of communicable diseases or testing, because there was no profit.

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Needed: Auditing of medical bills

Similar was the experience in Uttarakhand where I traveled as part of the national health mission. They were interested in the number of x-rays scans and things like that. There was a Chiranjeevi Scheme in Gujarat, but it was beneficial only for private hospitals and they crushed the public health system. Everybody was going to the private sector because the government is paying for you. Under this scheme the entire Rann of Kutch area was neglected. If given a chance, private sector will not miss an opportunity to overcharge. That is what happened in Pune where a civil society organization appointed patient advocates.

This small effort showed why medical bills need to be audited and scrutinized to protect innocent people who are forced to pay the bill. The hospitals refuse to pay the dead bodies or discharge the patient before the bills are paid. There was an invitation by Indian government to the foreign investors that all should come to India to exploit this great business opportunity. Foreign investment in the hospital sector has increased to over $104 billion now from $40 billion in 2013-14. It sets a model for other Indian private sector to make money in a different manner.

There are five large private hospital chains – Apollo, Fortis, Narayana, Max India, and Healthcare Global. They have combined revenues of Rs 129 billion in 2017 — an increase of about 80% in five years. Financial actors and financial institutions all emphasise on revenue generation and economic efficiency. That’s a business model. Is this a healthy model in India? The pandemic experience revealed large-scale over charging, irrational care and other negative behavior by the unregulated private sector in India.

Judicious use of telemedicine can help

I would say we need a rethinking. Lessons we have learned include that the cost of a hospital visit could be avoided if telemedicine has been an effective tool. People with non-communicable diseases, mental illness. And palliative care patients could have replaced hospital visits with telemedicine. One thing we are already proclaimed in the last four years is that free drugs and diagnostics under the National Health Mission could ensure availability of public healthcare through a web-based procurement which is done in Tamil Nadu.

Several antibiotic production units and vaccine producing centers were closed by the previous health minister. But why they were closed? Had they got some technology and money, they would have become world-class sources of essential medicines. Some states like Kerala are making a next step towards it. Enforcement of Clinical Establishments Act in all states is needed to regulate the private sector and ensure quality or services.

In the private sector, you have to pay. People are ready to pay, but do they get value for the money, the quality of care, medications/ treatments as per the standard treatment protocol, and, are the prices genuine? Those are the things covered in the Clinical Establishments Act. Court orders have saved us during the pandemic, but we must have systems in place to check malpractices.

The national disaster management agencies should work closely with disease control centers like NCD so that clear protocols are followed in the use of medical oxygen, diagnostics and use of medicines to reduce out-of-pocket expenditure. Another lesson from Kerala, Odisha is to increase allocation of funds to local self-governments such as municipalities, panchayats, or corporations. We need to tank the deadly virus for all these valuable lessons.

(Dr KR Antony is an Independent Monitor with National Health Mission. This article is the reproduction of his presentation at a webinar organised by