India Health Report 2010 Editors Ajay Mahal, Bibek Debroy, Laveesh Bhandari This report provides a broad direction for India’s health sector in the coming years. In doing so, it describes India’s achievements with regard to the three key goals of health policy—improved health status, financial risk protection, and equity. It does so by identifying some of the factors and the state of policy instruments that have facilitated these achievements in the areas of access, quality and efficiency. Hence, it looks at public health interventions, regulations, financing, and the organisation of healthcare. The role of both public and private institutions in the pro- vision of such services is studied in this overall context. The focus, therefore, is to analyse the status of health in India, and this is done by bringing together data and analyses from government documents, health economics and policy literature and a host of other sources. Organised in nine chapters, the report begins by making a case for investing in health as a sound economic decision. Ajay Mahal and Victoria Fan (Chapter 1) make the point that investing in health should be a priority, even when resources are otherwise limited, owing to the high returns from such investment. As such, they highlight the need to enhance protection against the financial risk inherent in an unhealthy population. They argue their case at four levels: (a) health is a major factor in influencing aggregate economic outcomes; (b) instances of ill health can expose entire households to financial risk and, in many cases, im poverishment; (c) health status itself is an indicator of human well-being; and (d) in a society undergoing great economic and social transition, such as India, improvements in health carry an added importance (and correspondingly constitute a greater challenge). As the mere provision of health infrastructure does not necessarily ensure universal accessibility, in Chapter 2, Laveesh Bhandari and Aali Sinha examine the multiple facets governing the access to, and utilisation of, health- care services: awareness levels; locational or financial constraints; efficiency of public and private healthcare providers; issues of quality and reliability of service and treatment; analysis of hospitalisation and out-of-pocket expenditure, etc. They conclude that despite heavy public intervention, the health burden carried by Indians con- tinues to be significant. They underline the importance of effectively addressing the constraining issues through effective systemic changes. In Chapter 3, Sumita Kale studies the new issues in disease management in India today, many of which are linked to growing prosperity in the country. One set of issues she examines is the rising incidence of diseases like ischemic heart, diabetes, cancer, HIV/AIDs, where health education and regular screening can play a significant preventive role. She also highlights the need to match society’s rising affluence with an environment where mental and physical disorders and disabilities are included in the mainstream discussion on health management. In Chapter 4, Laveesh Bhandari and Ankur Gupta discuss the status of the four major inputs fundamental to a good health profile in India: well-trained, adequate and well-motivated healthcare providers; a well spread and acces sible healthcare infrastructure; a good water supply and sanitation system which also facilitates hygienic prac- tices; and a population that is well supplied nutritionally and practices a hygienic lifestyle. Bhandari and Gupta highlight a single key problem underlying all these inputs: the lack of a public health focus. Seeing the multiplicity of government units involved in the various aspects of health administration, they recommend a centralised authority that is able to synchronise and coordinate various policy measures in line with the received evidence on improvi

2. India Health Report 2010

3. India Health Report 2010
Editors
Ajay Mahal
Bibek Debroy
Laveesh Bhandari
AN IMPRINT OF BUSINESS STANDARD LIMITED

4. Copyright © 2010 Indicus Analytics. All rights reserved.
The views and opinions expressed in this volume are those of the
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by the publisher or Business Standard Limited.
All information in this volume is verified to the best of the authors’
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First published in 2010 by T N Ninan for
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5. CONTENTS
Executive Summary vii
Chapter 1 1
The Case for Improving Health in India
Ajay Mahal and Victoria Fan
Chapter 2 21
Access to Healthcare
Laveesh Bhandari and Aali Sinha
Chapter 3 35
Emerging Issues in Health
Sumita Kale
Chapter 4 51
Inputs for Health
Laveesh Bhandari and Ankur Gupta
Chapter 5 73
Ethics and Side Payments
Sumita Kale and Laveesh Bhandari
Chapter 6 83
Access to Medicines in India: Issues, Challenges and Policy Options
Sakthivel Selvaraj and Veena Nabar
Chapter 7 97
The Evolving Role of the Government: Regulations and Programmes
Devendra B Gupta and Laveesh Bhandari
Chapter 8 109
Health Financing in India
Ajay Mahal
Chapter 9 127
Health Reform: A Historical Perspective and the Future
Bibek Debroy and Ajay Mahal
About the Authors 137

6. Executive Summary
This report provides a broad direction for India’s health of addressing the constraining issues through effective
sector in the coming years. In doing so, it describes India’s systemic changes.
achievements with regard to the three key goals of health In Chapter 3, Sumita Kale studies the new issues in
policy—improved health status, financial risk protection, disease management in India today, many of which are
and equity. It does so by identifying some of the factors— linked to growing prosperity in the country. One set of
and the state of policy instruments—that have facilitated issues she examines is the rising incidence of diseases like
these achievements in the areas of access, quality and ischemic heart, diabetes, cancer, HIV/AIDs, where health
efficiency. Hence, it looks at public health interventions, education and regular screening can play a significant pre-
regulation, financing, and the organisation of healthcare. ventive role. She also highlights the need to match society’s
The role of both public and private institutions in the pro- rising affluence with an environment where mental and
vision of such services is studied in this overall context. physical disorders and disabilities are included in the main-
The focus, therefore, is to analyse the status of health stream discussion on health management.
in India, and this is done by bringing together data and In Chapter 4, Laveesh Bhandari and Ankur Gupta
analyses from government documents, health economics discuss the status of the four major inputs fundamental to
and policy literature and a host of other sources. a good health profile in India: well-trained, adequate and
Organised in nine chapters, the report begins by making well-motivated healthcare providers; a well spread and
a case for investing in health as a sound economic decision. accessible healthcare infrastructure; a good water supply
Ajay Mahal and Victoria Fan (Chapter 1) emphasise and sanitation system which also facilitates hygienic prac-
that investing in health should be a priority, even when tises; and a population that is well supplied nutritionally
resources are otherwise limited, owing to the high returns and practises a hygienic lifestyle. Bhandari and Gupta
from such investment. As such, they highlight the need highlight a single key problem underlying all these inputs:
to enhance protection against the financial risk inherent the lack of a public health focus. Seeing the multiplicity of
in an unhealthy population. They argue their case at four government units involved in the various aspects of health
levels: (a) health is a major factor in influencing aggregate administration, they recommend a centralised authority
economic outcomes; (b) instances of ill health can expose that is able to synchronise and coordinate various policy
entire households to financial risk and, in many cases, measures in line with the received evidence on improving
impoverishment; (c) health status itself is an indicator of health outcomes.
human well-being; and (d) in a society undergoing great Medical ethics encompasses a vast range of issues and,
economic and social transition, such as India, improvements in Chapter 5, Sumita Kale and Laveesh Bhandari focus
in health carry an added importance (and, correspondingly, on one: the growing distrust of the medical profession in
constitute a greater challenge). India. This, they argue, has come about in response to
As the mere provision of health infrastructure does the unethical commercial links between healthcare pro-
not necessarily ensure universal accessibility, in Chapter 2, viders and drug/device manufacturing companies and
Laveesh Bhandari and Aali Sinha examine the multiple suppliers. They explain the market failure resulting from
facets governing the access to, and utilisation of, health- information asymmetry when healthcare providers, driven
care services: awareness levels; locational or financial con- by commercial considerations, provide biased information
straints; efficiency of public and private healthcare to patients. Given that the vast majority of the patients are
providers; issues of quality and reliability of service and uneducated and uninformed, thus unable to understand the
treatment; analysis of hospitalisation and out-of-pocket implications of the treatment or to seek redressal, the issue
expenditure, etc. They conclude that despite heavy public of conflict of interest becomes even greater in India. Kale
intervention, the health burden carried by Indians con- and Bhandari call for stricter action from the government
tinues to be significant. They underline the importance and regulatory agencies to safeguard patient interest and

7. viii Executive Summary
restore the moral character of what is expected to be a noble change in approach at the institutional level, that health-
profession. care must become a priority, and that the mindset in
In Chapter 6, Sakthivel Selvaraj and Veena Nabar take health policy must move on from targets of infrastructure
up issues involving the pharmaceutical industry. They provision to improvements in health per se.
document the inequitable access to medicines across regions
At the most basic level, the Indian health sector is
and income classes, and highlight the need for efficient
characterised by the lack of access to good quality health-
procurement systems for public healthcare facilities. They care services for all, a result of a host of specific issues
examine all aspects of the industry, ranging from market that are identified in the body of this report. These
structure, pricing policies, and the role played by patents specific constraints can all be traced to problems of poor
in stifling competition, and go on to link the impact of planning, low resource allocation, missing institutions, and
regulation on these crucial issues. They recommend a good inadequate implementation. In an attempt to address these
quality and sturdy regulatory mechanism that can take and specific constraints, India Health Report 2010 identifies
implement decisions aimed at ensuring low cost availability some of the changes required at the central, state and
of medicines in a sustainable manner. local government levels—in policy and regulation, in imple-
In Chapter 7, Devendra B Gupta and Laveesh Bhandari mentation and planning, and in education and advocacy.
study the government’s two-pronged approach to ensuring More importantly, it identifies the one factor that lies
better health outcomes for all: regulation and government behind each of these bottlenecks: the lack of focus on
programmes aimed at delivering better healthcare to all. health. Lack of focus shows up in many different ways—
They review the evolution of the government’s role over inadequate resource allocation, institutional and regulatory
time, focusing on central government policies. They also gaps, laxity in implementation of government programmes,
examine the status of regulations and regulatory mechan- etc. The one and the most important change that India
isms in India today and call for a central entity that can needs is focused attention on the health sector.
provide the necessary leadership to create mechanisms that Greater focus is not only about greater resource allo-
can adequately address issues of market failure in the health cation, though that is important; nor is it about devising
sector. large-scale government programmes for healthcare delivery,
In Chapter 8, Ajay Mahal documents the inequity and though they form an important component of India’s large
inefficiency prevalent in healthcare financing. The chapter portfolio of welfare programmes. Focus requires adequately
reviews the recent initiatives in health financing systems— empowering the institutions that govern India’s healthcare
various government schemes for financing public health sector and making them answerable for health outcomes. For
expenditures and health insurance programmes in the instance, the Ministry of Health and Family Welfare needs
private and public domain. More crucially, he provides an to be strengthened in terms of both scale and scope; it also
alternative methodology of conceptualising health finan- needs to be made more answerable for India’s poor health
cing policy, one that corrects the current lacunae and flawed outcomes, and a strong public health focus needs to be put
focus and works towards greater coverage rather than (cost) in place either within the ministry or with a new entity so
efficient access. This is critical to achieving a sustainable, empowered.
equitable and efficient healthcare system in India. The innumerable problems that impact health out-
In the concluding chapter, Bibek Debroy and Ajay comes in India need to be seen foremost in the context of
Mahal tie up all the threads and examine the evolution of missing and/or weak institutional structures. It, therefore,
healthcare reform in the country, through policy changes, becomes important to empower institutions that oversee
programmes and legislation. They point to the need for a India’s health sector and make them answerable.
Acknowledgement: We would like to thank Ankur Gupta, Swati Gupta and Anirudh Swami of the research team at Indicus Analytics who
provided us with key inputs and data support.

8. About the Authors
Laveesh Bhandari is the Founder Director of Indicus Devendra B Gupta is Senior Consultant at the National
Analytics. He has led policy-oriented studies for nationally Council of Applied Economic Research, New Delhi and
and internationally reputed organisations such as the Visiting Professor, Institute for Human Development,
Finance Commission, World Bank, United Nations New Delhi. He received his Ph D from the University
Children’s Fund, Asian Development Bank and Food and of Birmingham and has been a development economist
Agriculture Organization. He has published extensively for more than 40 years. He has taught at a number of
and is a columnist for newspapers and newsmagazines. universities and institutions in India and abroad and has
His work on inequality, education and regional growth is worked extensively with the World Bank, United Nations
frequently referred to in policy debates in India. He has Children’s Fund, World Health Organization, Institute of
received a number of awards, including the EXIM Bank Economic Growth, National Institute of Public Finance
Award for his work on international joint ventures and the and Policy, etc.
Hite Fellowship for his work on international finance.
Sumita Kale is Chief Economist with Indicus Analytics.
Bibek Debroy is Professor at the Centre for Policy She received her Ph D from the University of Pune and
Research, New Delhi and Contributing Editor with the M Phil in the Economics of Developing Countries
Indian Express. He has worked in academic institutes, for from the University of Cambridge. She has a number of
the government and an industry chamber. He is the author publications to her credit and has been visiting faculty at
of several books, papers and popular articles. His special the Department of Economics, University of Pune and at
interests are education, health, law, governance and trade. the National Insurance Academy, Pune.
Victoria Fan is a doctoral candidate in Health Systems Ajay Mahal is Associate Professor of International Health
at the Department of Global Health and Population, Economics at the Department of Global Health and
Harvard School of Public Health. Ms Fan received Population, Harvard School of Public Health. His research
a bachelor’s degree in mechanical engineering with a uses economic analyses to influence public health policy
minor in cultural anthropology from the Massachusetts in developing countries. He is especially interested in
Institute of Technology. Her research focuses on impact policy issues related to the HIV/AIDS epidemic, resource
evaluations on health in India. She has worked with the allocation in the health sector, ageing, human resources
World Health Organization, World Bank, United States and decentralisation and empowerment.
Agency for International Development, Bangladesh Rural
Advancement Committee, Self Employed Women’s Veena Nabar studied economics at the Universities of
Association, Harvard Global Equity Initiative and Harvard Bombay and Cambridge. After a short teaching stint at
Initiative for Global Health. Cambridge, she worked on various agriculture-related
projects at the Agricultural Economics Research Centre of
Ankur Gupta received his BTech and MTech degrees in the University of Delhi, before moving on to working with
Biotechnology from the Indian Institute of Technology, cooperatives under the Ministry of Agriculture. She has
Delhi. He is a Research Consultant at Indicus Analytics worked with community-based organisations, undertaken
focusing on providing financial and technology leader- several research assignments on economic and social issues
ship in education, healthcare and energy sector studies. for the government and international organisations, and
In addition, he has conducted many studies on India’s has many publications to her credit.
economic geography.

9. 138 About the Authors
Sakthivel Selvaraj is a Health Economist and faculty Aali Sinha was awarded the M S A Rao Scholarship by
member at the Public Health Foundation of India. He is the Delhi School of Economics, where she completed her
currently engaged in teaching and research in the area of post-graduation in sociology. She has worked extensively
healthcare financing, pharmaceutical economics and the on reproductive child health, education of poor children,
economics of tobacco. He was a Takemi Fellow (Post- spending patterns in healthcare, and access to healthcare.
Doctoral Fellow at the Harvard School of Public Health, Ms Sinha co-authored Social and Economic Profile of India,
Boston) and a Fulbright Scholar during 2006–07. He was a book that is a ‘first resort’ reference on Indian socio-
formerly engaged as a Health Economist in the National economic conditions.
Commission on Macroeconomics and Health, Ministry of
Health and Family Welfare, Government of India.