Private Healthcare in India: Boons and Banes

These costs are by no way means affordable. By these standards, even the average citizens of Goa – the state with the highest net state domestic product ("NSDP") per capita for 2018-2019 at INR 467,998 (EUR 5,373) – can barely afford it. Lagging states like Maharashtra, with NSDP per capita at 176,102 (EUR 2,025) (2017-2018) and Bihar, at only 43,822 (EUR 494), cannot afford it at all. In Mumbai - one of India’s most prosperous cities - only 27% had an annual income of more than INR 1 million (EUR 11,506) (only group that could afford Covid-19 treatment at private hospitals), 51% had it between INR 150,000 (EUR 1,726) to INR 1 million (EUR 11,506), and 8% had it below INR 75,000 (EUR 863) in 2015. India’s per capita income for FY20 was only INR 11,200 (EUR 129) a month, insufficient to even seek a day’s worth Covid-19 treatment at a private hospital.

Access to health services is not a function of revenue only. The divide between urban health infrastructure and rural health infrastructure shows an important facet of India’s healthcare story. In 2013, 72% of rural Indians only had access to one third of India’s health infrastructure. 32% of rural residents had to travel more than 5 km to seek OPD (first contact between patient and hospital staff) treatment. The Economic Survey 2018-2019 noted that 60% primary health centres in India only had 1 doctor, 5% had none! They were all located in rural India. Inaccessibility to basic healthcare, especially in villages that also participate in unscientific medical practices, could therefore be one reason why many diseases - that other regions have eradicated or largely suppressed - still persist. Tuberculosis rate detection was 74% and there were 199 incidents per 100,000 people in 2018. In 2019, India reported 2.4 million tuberculosis cases and 79,144 deaths. Similarly, India reported 120,334 new leprosy cases in 2017, 7,071 tetanus (that is 48% of global reported cases) and 9,622 diphtheria (42% of global reported cases). While lack of basic healthcare is one side, lack of cleanliness and hygiene is the other. In 2017, 36% of rural Indians were practicing open defecation, only 53% were using basic sanitation services and only 49% had basic handwashing facilities, including soap and water.

The industry of private health

Since the beginning of the last decade, the size of private health-related expenditure per capita PPP has jumped significantly (see figure 1). Since then, the growth rate of expenditure after this shift has nearly remained the same as for public expenditure, but with a significant spending difference. This state of things reflects the new affluence of the Indian middle class, the number one beneficiary of the (almost) double digit growth rate of India in the 2000s.

Figure 01

(Source: WHO Global Health Observatory: domestic general government health expenditure; domestic private health expenditure)

India has a total of 43,486 private hospitals, 1.18 million beds, 59,264 ICUs, and 29,631 ventilators. On the other hand, there are 25,778 public hospitals, 713,986 beds, 35,700 ICUs, and 17,850 ventilators. Total private infrastructure accounts for nearly 62% of all of India’s health infrastructure. The capacity of most public hospitals and private hospitals is the same in the states (measured by beds to hospitals ratio, ICU to hospitals ratio, and ventilator to hospitals ratio), besides Chandigarh and Puducherry, where private hospitals have more capacity than public hospitals.

Out of 35 Indian states and Union Territories - Daman & Diu, Dadra & N Haveli are counted together, Ladakh is excluded due to missing data - ("States"), 15 states (Andhra Pradesh, Bihar, Dadra & N Haveli Daman & Diu, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand) have more private hospitals, beds, ICUs, and ventilators ("Infrastructure"), than government Infrastructure. These 15 states account for approximately 74.25% of India’s projected population for 2020 (including Ladakh’s population). Private Infrastructure forms 69-70% of all health infrastructure in these 15 states. Private infrastructure in other states (where government infrastructure exceeds or equals private infrastructure) forms nearly 35-36% of all health infrastructure.

If not all can afford private healthcare, does it then make sense to count it as part of a state’s infrastructure? For instance, when measured against the size of the total population of Maharashtra, all beds in the state provide 1.9 beds per 1,000 people. But this count is a bit misleading.

According to 2018 estimates, 37% of Maharashtra’s population fell below the poverty line. Assuming optimistically, even if 50% of Maharashtra’s population could afford private healthcare in 2020, the private infrastructure would provide 2.93 beds per 1,000 for these privileged ones. But everyone can afford public healthcare (even the rich can choose to avail public services) and, in that case, the public infrastructure at everyone’s disposal drops to 0.4 beds per 1,000. Being rich creates a huge difference in the availability of quality healthcare services in India!

Income disparity aside, the flourishing private healthcare in Maharashtra and other states show that, even though a big portion of the population cannot afford it, there is still a part of the population who can, enough to attract and keep the private healthcare business running. That in itself is a huge security for states with poor public healthcare. When needed, state governments can mandate private healthcare providers to serve the whole population at discounted prices in distressing times like the current one (with necessary compensations). This happened in Mumbai and Delhi during the Covid-19 crisis, when the state government capped treatment (at affordable) prices at private hospitals to take care of the poor.

But what about states with huge populations, which do not have enough privileged class? Bihar is a classic example - amongst the poorest states in India - whose population is larger than Maharashtra by 1.6 million, but has a much poorer health infrastructure. While Bihar has a comparable number of total hospitals (3,034) to that of Maharashtra (3,203), Bihar’s, both public and private hospitals, have much less capacity. Bihar in total has only 30,857 beds (11,664 in public, 19,193 in private), compared to Maharashtra that has 231,739. In the saddest state of affairs, 120 million residents of Bihar only have 11,664 public beds at their disposal i.e. 0.09 beds per 1,000 people. The rest of the 19,193 are shared only by a handful of rich ones. At worst, even if Bihar were to mandate private infrastructure to serve its population in an emergency, it would still only have 0.24 beds per 1,000 people, amongst the lowest in India.

A cruel form of allowing private healthcare to lead the industry is that it only caters to the ones who can afford it. Hence, poor states like Bihar and most of the North East have seen little private healthcare, whereas other states that run India’s economy like Maharashtra and Karnataka have had access to a much larger amount. That is natural: businesses will come up where they can be sustained and will only serve those who can pay upfront. The government however has a different mandate – to serve everyone with good healthcare – that it has unfortunately failed to do for years. The country’s health infrastructure does not remotely meet the WHO standards. Ultimately, it is for the public, and not for the private sector to care. The pandemic has in fact very well reflected this.

Modicare and the limited implications of private hospitals in health insurance

The New Health Policy 2017 took a sharp turn and embraced the private sector providing for universal health coverage and "strategically purchasing" private infrastructure. One year after, the Modi government launched the Ayushman Bharat Yojana (Indian Health Scheme), known as "Modicare" because, like in the case of the "Obamacare", the intention was to give access to health care to the 40% of the Indians who were the poorest. Modi described this plan as "the world’s biggest health-insurance plan" because the government committed itself to taking care of the health expenditure of about 500 million persons whose households were eligible to receive almost USD 7,000 a year for hospital expenses.

Eligible patients could seek treatment at any institution, public or private, that had joined the scheme. But this is precisely where the main problem lay: few private institutions joined the scheme because of the low reimbursement rates the government was offering for consultations and surgery. Why? Because the scheme has remained underfunded. The budget for the first year amounted to 0.01% of the GDP. In September 2020, only 23,300 hospitals had been empanelled - half of them public. Only 1% of the 2,000 multi-speciality private hospitals have enrolled under the Ayushman Bharat scheme, which means that hospitals like Max, Medanta, Fortis, Apollo etc. have not come on board simply because they are not non-profit enterprises.

Many large Indian businesses have a stake in private hospitals and most of them are also looked at as business units – with an active marketing component too, vis-à-vis foreign medical tourists in particular. In 2020, medical tourism was estimated to be worth USD 5-6 billion, as half a million foreigners come every year for some treatment (mostly from South Asia, Africa and Central Asia). Only last month, Bajaj Finserv - a financial services conglomerate - entered the healthcare ecosystem to offer its users healthcare packages. For such private healthcare providers, it matters where Bollywood actors seek treatment, where the "rich" feel most comfortable, or where it feels like a resort.

Indeed, the Covid-19 crisis has implications for all. Firstly, private hospitals now realize how much more scope they have in expanding their services in India. How much additional revenue can they generate? That’s debatable and perhaps that is what will lead them to determine their "potential" serviceable market. They have also realised the terms they’d have to agree to if there is another emergency. This crisis will certainly change "business" terms for private healthcare providers, especially insurance companies, on how they operate.

Secondly, policy makers have also realized how much public health lags in India and how much more needs to be done. Probably they were always aware of it, but the crisis is a major jerk. There is certainly acknowledgement for it, the government recently announced a boost for public healthcare, it is however to be seen how much things change on the ground.

Thirdly, people now realize the demerits of having a healthcare largely based on an "out-of-pocket" expenditure model. An average Indian just cannot access private healthcare that owns most of the infrastructure in India, even in case of an emergency. Will people then create a political pressure on their elected representatives? A way to see this will be on how much space will upcoming election manifestos give to expenditure on healthcare and insurance.

Lastly, key decision makers have probably also realized that it will take a long time before public healthcare in India becomes strong enough to independently deliver on its mandate. A way that the government could go about speeding up the process is by actioning its recent health policy and partnering with the private sector, instead of fighting it. Private healthcare, because of being a business unit, is highly efficient but not very equitable. The government needs to view private healthcare as a "business", acknowledge its "business objectives" and fill in the gaps to make it equitable. In better incentivizing and enabling private healthcare to penetrate rural areas, the government could well capitalize on its "strategic purchasing" of private healthcare units plan and start delivering on its mandate.

The fundamental argument however remains unchanged, yesterday and even today: the need for more expenditure – to fund its hospitals, staff, or even the "world largest public insurance scheme". Once there is consensus that Indians deserve more than 1.29% of GDP expenditure on healthcare, it will be a question of using that money to either compete or cooperate with private healthcare providers.

Copyright: Arun SANKAR / AFP