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Home > 2022 > A Mess Called India’s Health Sector | Govind Bhattacharjee

Mainstream, VOL LX No 19, New Delhi, April 30, 2022

A Mess Called India’s Health Sector | Govind Bhattacharjee

Friday 29 April 2022


by Dr. Govind Bhattacharjee *


Nothing like the pandemic has ever exposed the decrepit state of India’s healthcare system and its extremely limited capacity. Even before the pandemic, it was not unknown— only authorities had failed to take any notice because of their inability to address the hopeless state of our public healthcare system. Underfunded and neglected for many decades, it couldn’t have been corrected within a short span of time. Some data will help to understand the precise nature of the problems that afflict our healthcare sector. The latest 75th Round of National Sample Survey (NSS) on health conducted in 2017-18 revealed the gross inadequacy of our public healthcare system to meet the needs of our people, especially those belonging to the economically vulnerable sections. A serious illness like cancer would often push families below the poverty line from which they are unlikely to recover for a long time, if at all. It is because our public health system caters to the needs of less than even a third of our population — the rest being left to private medical care. The NSS survey revealed that taking hospitalisation and non-hospitalisation cases together, about 66 percent of India’s population receive treatment from private hospitals or clinics - only 33 percent of the rural population and 26 percent of the urban population avail treatment from public hospitals which means the poor depend on private healthcare more than the rich. Based on per capita monthly consumption expenditure, only 36 percent of the bottom quintile availed treatment in government hospitals. There are also wide variations among the states, but the government hospitals and health centres cater to less than 20 percent of population in Uttar Pradesh, Punjab, Bihar and Haryana. Around 95 percent Indians avail expensive allopathic treatment only — the alternative treatments of Ayurveda, Unani, Siddha and Homeopathy are yet to catch up in a big way despite increasing governmental support for their promotion.

The average medical expenditure per hospitalisation case in private hospitals in 2017-18 was Rs 31,845 which was seven times costlier than in public hospitals, yet most poor chose to go to the private hospitals due to the dysfunctional state of public hospitals plagued with long queues, absence of specialists and medicines, non-functional equipment, etc. The out of pocket medical expenditure and private hospitalisation costs dig into the savings of poor and pushed them into debt, as 85.9 percent of rural people and 80.9 percent of urban people don’t have any health expenditure coverage through insurance - Government health schemes covered just 13 percent of rural and 9 percent of urban population. The Survey also found that on an average, a rural household spent Rs 16,676 on hospitalisation expenses annually, while for an urban household, it was Rs 26,475. It was to address this colossal gap that the Union Government had launched the flagship Pradhan Mantri Jan Aarogya Yojana (PMJAY) as part of Ayushman Bharat in 2018, after the survey was conducted.

As per the Annual Report of the Union Ministry of Health and Family Welfare, about half our population - around 10.74 crore poor and vulnerable families selected on the basis of Socio-Economic Caste Census (SECC) data for rural and urban areas, are entitled under PMJAY for cashless and paperless access to services at empanelled hospitals, which includes 3 days of pre-hospitalisation and 15 days of post-hospitalisation expenses, irrespective of family size or age. The funding of the scheme is shared between Central and State Governments in 60:40 ratio, except for the 11 special category states for which the ratio is 90:10. Till November 2021, all States except West Bengal and Odisha and all Union Territories except NCT Delhi have implemented the scheme and 17.11 Crore Ayushman cards have been issued. Approximately 2.4 Crore hospitalizations amounting to almost Rs. 28300 Crores have been authorized under the scheme - this is a massive expenditure which apparently does not create any additional capacity in respect of public health infrastructure. The infrastructure part is taken care of by Ayushman Bharat Health Infrastructure Mission (AB-HIM) which aims to strengthen the critical healthcare infrastructure of the country at several levels including villages and blocks by building facilities for primary and critical care in urban and rural areas. Budget allocation for 2022-23 on this is Rs 5155 crore, while that for PMJAY stands at Rs 6412 crore. The Ayushman Bharat policy intervention though extremely beneficial for the poor families thus comes at a high cost and addresses only one part of the malaise, leaving the other part, regulation of private healthcare, completely unaddressed, which will be discussed later in greater details.

Health is primarily a state subject included in the State List under Schedule VII of our Constitution. However, the budget of the Union Ministry of Health and Family Welfare includes expenditure on central sector and centrally sponsored health schemes like the National Health Mission (National Rural Health Mission and National Urban Health Mission), Ayushman Bharat, Pradhan Mantri Swasthya Suraksha Yojana, National AIDS & STD Control Programme, Rashtriya Swasthya Bima Yojana, Family Welfare Schemes, etc. and also on the autonomous bodies like AIIMS, ICMR, PGIMR, etc. which are like little islands of excellence in a vast array of nearly dysfunctional state public healthcare institutions. In that sense, the landscape of health in our country closely resembles our higher educational landscape which also remains littered with numerous dysfunctional institutions scattered with a few little islands of excellence like the IITs, IIMs and some Central universities and institutions of excellent. Both sectors represent stark failures of our public policies since independence.

The total expenditure made by the Centre and the states on health amounted to barely 1 percent of GDP since 2011-12; it rose marginally to 1.3 percent in 2020-21 due partly to the contraction of GDP in that year as a consequence of the Covid-19 pandemic. Share of the states’ health expenditure in GDP has increased from 0.7 percent to 1.1 percent over this period (2011-21). As regards the share of Central government’s expenditure on health, it has declined over the years, from 0.23 percent to 0.19 percent of GDP over the period from 2011-12 to 2022-23 (BE), after rising to 0.32 percent in 2021-22 (RE). The target of 3 to 6 percent of GDP for the health sector talked about by various five-year plans and health policies remains and will remain an unachievable chimera at least during our lifetime. In absolute terms, in 2020-21, Indian states had spent a total of Rs 42.1 lakh crore, of which only Rs 2.16 lakh crore went to health. The total Central expenditure in 2020-21was Rs 34.26 lakh crore, of which only Rs 38000 crore went to health (excluding expenditure for the centrally sponsored schemes for which Rs 39569 crore were transferred to the states). Central expenditure on health has remained more or less the same over the years except for a brief interlude during the pandemic years when it rose to Rs 73000 crore, before declining to Rs 48000 crore in 2022-23 (BE). The total union budget allocation in FY 2023 for the Ministry of Health and Family Welfare (MoHFW) including transfer to states has practically remained at the same level as in FY 2022 (RE).

India’s share in GDP at a meagre 1 percent remains among the lowest in the world, and far below the world average of 5.8 percent, as per World Bank data for 2018. Even our neighbours spend more than us; China and Bhutan spend respectively 2.9 percent and 2.6 percent of their GDP on health; even Nepal, Sri Lanka and Pakistan spend 1.1 percent - not to speak of the OECD countries’ average of 7.6 percent. Our health expenditure is woefully inadequate and this is reflected in India’s low international raking in respect of almost all health indicators. A Lancet study in 2018 had placed India at 145th position among 195 countries in terms of quality and accessibility of healthcare, below our neighbours China, Bangladesh, Sri Lanka and Bhutan. Earlier a WHO study in 2000 titled “Measuring Overall Health System Performance for 191 Countries” had placed India at 112th rank among 191 countries. Among all the 193 countries that are UN members, India’s rankings in respect of health parameters like life expectancy (69.8 years in 2021) and under-5 infant mortality (34.3 per 1000 in 2019) have always been way below 100; even poorer neighbours of ours like Sri Lanka and Bhutan have succeeded in achieving better health outcomes with lesser resources by focussing on better delivery. An Oxfam survey in 2020 found that India’s healthcare budget was the fourth lowest in the world. [1]

The sector is also beset with too many problems most of which can be traced to inadequate funding. Poor funding has led to poor capacity and poor quality of healthcare. It is a shame that even after 75 years of independence, nearly 8 lakh children die every year before they reach the age of five and 31 percent of children under 5 — nearly 4.8 crore — suffer from stunted growth due to malnutrition. [2] There are also administrative problems like absenteeism of healthcare professionals in the Primary Healthcare Centres (PHCs), acute shortage of medical personnel, inadequate number of seats for undergraduate and postgraduate medical education, inadequate research infrastructure, perennial neglect of rural healthcare, etc. The pandemic has exposed the gross inadequacy of our health delivery system which led to a temporary increase in expenditure and consequent expansion of capacity, but with the pandemic now receding fast, we are back to our traditional apathy towards health. In the absence of adequate funding, our health policies have remained lopsided, despite improvements in many health outcomes. But the achievements have remained way behind the need.


Under the colonial empire, India had only 21.25 lakh beds, that is, less than one for every thousand people, one doctor for 6300 people and one nurse for 43000 people. Half a million people died of tuberculosis every year, one million from malaria. Over two lakh mothers died from childbirth and half of all the deaths were of children under the age of 10. In 1943, the then British Government appointed a 23-member Health Survey and Development Committee led by a civil servant, Sir Joseph Bhore. Three years later, the committee submitted a comprehensive report running into 1111 pages that constituted the first template of our health policy. Its influence continued well after independence in shaping our approach to health under the five-year plans. Recognising the underlying poverty and malnutrition, the report delinked healthcare from the ability to pay: “No individual should fail to secure adequate medical care because of an inability to pay for it.” It emphasised on prevention and securing the cooperation of people while envisaging a big role for the state in extending healthcare to citizens. It may be mentioned that at about the same time, the William Beveridge report in 1942 was laying the foundation of the Welfare state in war-ravaged Britain to eliminate “want, disease, ignorance, squalor and idleness”, and as a consequence, in 1948, the National Health Service was established in Britain. The Bhore Committee Report figured widely in the Constituent assembly debates on allocation of functions between the Centre and the states and in the implicit recognition in our Constitution that right to health is integral to the right to life. [3]

After independence, health was addressed through our Five Year Plans through programmes and schemes. These included schemes like the National Malaria Eradication/Control Programme, for drinking water supply and sanitation and various community development programmes to ensure preventive healthcare in rural areas. As against the Planning Commission recommendation of 10 percent of plan outlay for health, the actual outlay was less than 5 percent. The government also partnered with WHO and UNICEF to extend healthcare services. After setting up the AIIMS for allopathic treatment, Ayurvedic research centre was also set up under recommendation of the Chopra Committee 1947 and Pandit Committee in 1948,, followed by Homeopathy and other systems of indigenous medicines like Yoga, Naturopathy, Unani and Siddha, under recommendations of the Dave Committee 1955 and Uduppa Committee in 1958. [4] But the perennial underfunding failed to create adequate capacity which stymied the growth of capacity in our health sector. However, the Committees gave important recommendations from time to time many which were implemented to create a basic rural health infrastructure. Mudalier Committee (1959) recommended upgradation of District Hospitals /PHCs, Chadha Committee (1963) recommended integration of health and family welfare programmes, Kartar Singh Committee (1973) introduced multipurpose health worker scheme, and Srivastava Committee (1975) focussed on Medical education and healthcare training.

In 1978, the World health Assembly held at Alma Ata, Kazakhstan, which was then a part of the USSR. At the instance of WHO and UNICEF, it adopted the “Alma Ata Declaration” of “Health for all by 2000”, to enable people to attain “a level of health that would permit them to lead a socially and economically productive life”. It focussed on community based health systems.

The declaration stated that:

An acceptable level of health for all the people of the world by the year 2000 can be attained through a fuller and better use of the world’s resources, a considerable part of which is now spent on armaments and military conflicts. A genuine policy of independence, peace, détente, and disarmament could and should release additional resources that could well be devoted to peaceful aims and in particular to the acceleration of social and economic development of which primary health care, as an essential part, should be allotted its proper share. [5]

The world is still far away from achieving these goals even after more than 40 years of the declaration, but that should not undermine their importance or weaken our collective resolve to pursue them, howsoever unattainable they may seem. Five years after the declaration and 36 years after independence, India formulated its first health policy in 1983. The policy laid stress on preventive and promotive public health and rehabilitation aspects of healthcare while emphasising upon the need to establish a comprehensive primary health care system to access the remotest areas of the country, through setting up of a highly dispersed network of primary health care services linked with extension and health education. It was to be supplemented an integrated net-work of evenly spread speciality and super-speciality clinics and hospitals and a system of referrals from the primary centres upwards to avoid congestion. An important element of the policy was intermediation through “Health Volunteers” who possessed appropriate knowledge and were equipped with simple skills and requisite technologies. A series of targets to be achieved by 2000 in respect of infant mortality (60), birth rate (21), death rate (9), life expectancy (64 years), maternal mortality (<2), potable water (entire rural population) etc. were also indicated in the policy.

In a significant shift from this policy and diluting the role of the state, in 1993, the 47th NDC meeting under the chairmanship of Prime Minister P V Narasimha Rao resolved to focus government efforts upon preventive healthcare, epidemic control and creation of data banks, while leaving the role of curative healthcare to private professionals, envisaging a wider participation of the private sector in healthcare services. While the shift was welcome, it needed to be accompanied by the creation of an adequate regulatory architecture to prevent exploitation and abnormal profiteering by private healthcare providers which continues to plague our healthcare system even now. This is what led to the unbridled greed of private sector marked by a singular lack of enforceable ethical standards. This in a large way is responsible for the mess that has become synonymous with our health sector. The private sector was given liberal tax concessions and allotment of land at nominal costs to set up hospitals against the stipulation of free treatment for the poor. But when the private hospitals actually came up availing all these concessions and denied access to the poor at affordable rates, governments found themselves powerless to bring them to book. This was partly due to legal and administrative weaknesses, but mostly due to the governments’ dependence on private healthcare in the absence of their own lack of capacities. Driven by surging demand, the private clinics and hospitals ballooned; by 2002, over two-thirds of all hospitals and facilities belonged to the private sector which was running 11345 out of total 15393 hospitals in India, with 2.63 lakh beds. Of the total 22292 allopathic dispensaries, governments ran only 9856. [6]

The 2001 census reported a total population of 102 crore for the country, with 70 percent living in rural areas. But our three-tier rural health infrastructure of sub-centres, primary health centres and Community Health Centres (CHCs) could collectively ensure only 57000 beds for 700 million people, or only one bed for 12000 persons. To bridge the gap, in 2005, the government launched the National Rural Health Mission (NRHM) that would later be converted in the National Health Mission (NHM) after including the National Urban Health Mission (NUHM) in 2013. While launching the NRHM, the PM Manmohan Singh noted, “Many villages in India today do not even have a rudimentary healthcare provider.” As Shankar Aiyer noted in his book The Gated Republic, it was a deja-vu moment that recalled the Bhore Committee observations about rural health status in India before independence.

The next National Health Policy came in 2002, with the objectives of achieving an acceptable standard of good health of Indian Population, decentralizing public health system by upgrading the infrastructure of existing institutions, ensuring a more equitable access to health service across the social and geographical expanse of India, achieving an acceptable standard of good health of Indian population, decentralizing public health system by upgrading infrastructure in existing institutions and ensuring a more equitable access to health service across the social and geographical expanse of India. A revised set of targets was prescribed to be achieved by 2015.

The 2001 census reported a total population of 102 crore for the country with 70 percent living in rural areas. But our three-tier rural health infrastructure of sub-centres, primary health centres (PHCs) and Community Health Centres (CHCs) could collectively ensure only 57000 beds for 700 million people, or only one bed for 12000 persons. [7] Leaving out the private sector, this was far worse than the pre-independence capacity. To bridge the huge gap in capacity in the rural areas, in 2005, the government launched the National Rural Health Mission (NRHM). [8] While launching the NRHM, the PM Manmohan Singh noted, “Many villages in India today do not even have a rudimentary healthcare provider.” As Shankar Aiyer noted in his book, The Gated Republic, it was a deja-vu moment that recalled the Bhore Committee observations about rural health status in India before independence.

NRHM aimed at strengthening of the health system in rural areas by building an integrated network of all primary, secondary and a substantial part of the tertiary care, providing a continuum from community level to the district hospital, with robust referral linkages to tertiary care. It laid particular focus on strengthening the primary health care System including outreach services in rural areas. The aim was to achieve “equitable, affordable and quality healthcare services that are accountable and responsive to people’s needs” by building “state, district and city capacity for decentralized outcome based planning and implementation, based on varying diseases burden scenarios, and using a differential financing approach.” Did it achieve these objectives? The answer is a resounding “NO”. Over 70 percent of doctors work in urban areas and are reluctant to work in the rural areas, leaving the healthcare of 70 percent of population just on 30 percent of the available doctors. The entire system is a decrepit one, with many sub-centres, PHCs and CHCs functioning without even the most basic necessities like water connection - let alone medicines, doctors and specialists.

In 2004, the 60th National Sample Survey found that 78 percent of rural and 81 percent of urban Indians preferred to go only to private doctors and hospitals, leading to the draining of precious resources and savings of households. A report by Shamika Ravi, Rahul Ahluwalia and Sofi Bergvist titled “Health and Morbidity in India: 2004-14” found that about 7 percent of Indian population fell below the poverty line due to out of pocket health expenditure. Over 80 percent of all Indians (85 percent in rural areas) have no health insurance cover. 79 percent of rural and 83 percent of urban Indians have drained their savings and millions have been pushed into poverty because of the inability of the state to provide adequate healthcare as promised in article 47 to the Constitution under the Directive Principles of State Policy: “The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties.” It is almost as it the state has abdicated these responsibilities and left it to the private sector which has flourished. The private hospital market is estimated to be worth Rs 5 lakh crore - India has an estimated 50000 private hospitals and nursing homes, and 4.2 lakh beds. Private sector accounts for 75 percent of all hospitals and 40 percent of our total bed capacity. KPMG estimates that the private healthcare sector accounts for 82 percent of the net value of healthcare market. [9] In contrast, in 2017, there were 21403 government hospitals with 2.65 lakh beds for nearly 900 million rural population, making it one bed for 3300 persons. Total number of government hospitals stood at 25778 with 7.14 lakh beds which translates into one hospital for 52000 persons. The government rural infrastructure of health comprised 1.58 lakh Sub-Centres, 25743 PHCs and 5624 CHCs for 900 million people. In fact, there was no alternative but to fall back on the private sector for extending healthcare to citizens.

The state virtually admitted its inability to create a viable health infrastructure while launching the Rashtriya Swasthya Bima Yojana in 2015, to be subsumed later into the Pradhan Mantri Jan Arogya Yojana (2019), and Pradhan Mantri Jeevan Jyoti Bima Yojana (2015) for providing access to the poor (BPL) to treatment in private hospitals through insurance cover up to a certain limit. When the third National Health Policy was adopted in 2017, it explicitly aimed to fill the critical gaps in public health services by “strategic purchasing” — in other words, outsourcing the public healthcare system to private providers. The policy acted as a catalyst for driving investments to the private healthcare sector, but without learning anything from the past, again failed to create a regulatory structure to prevent the hapless citizens and the poor from getting fleeced by the private hospitals.

The Ayushman Bharat - National Health Protection Mission 2019 adopted a continuum of care approach, comprising of two inter-related components: (1) Health and Wellness Centres (HWCs) to deliver an expanded range of services to address the primary healthcare needs of the entire population in their area, expanding access, universality and equity close to the community and (2) Pradhan Mantri Jan Arogya Yojana (PM-JAY) which is an ambitious health insurance scheme. The PMJAY promises 10 crore households covering roughly 50 crore people an annual coverage of Rs 5 lakh per family, with the government proposing to pay Rs 1100 as premium per family. It requires the State Health Agency (SHA) to implement the scheme. The government claims that since inception, 5.48 million claims for Rs 7608 crore have been settled.

The National Health Policy 2017 aims to increase Life Expectancy at birth from 67.5 to 70 by 2025, reduce infant mortality rate to 28 by 2019, increase utilization of public health facilities by 50 percent from current levels by 2025, provide access to safe water and sanitation to all by 2020, increase health expenditure by Government from the existing to 2.5 percent of GDP by 2025 and state sector health spending to more than 8 percent of their budget by 2020, establish federated integrated health information architecture, Health Information Exchanges and National Health Information Network by 2025, etc. Some of the achievements of our health policies are shown in Table 1; they are not insignificant, but still left much to be desired.

Table 1: Health Indicators since Independence 

Indicators 1951 1981 2000 2019
Demographic Changes        
Life Expectancy 36.7 54 64.6 69.7
Crude Birth Rate 40.8 33.9 26.1 17.4
Crude Death Rate 25 12.5 8.7 7.3
IMR 146 110 70 28
Epidemiological Shifts        
Malaria (cases in million) 75 2.7 2.2 0.34
Small Pox >44887 Eradicated
Leprosy cases per million population 38.1 57.3 3.74 1.94
Polio   29709 265 176
SC/PHC/CHC 725 57,363 1,63,181 196443
Dispensaries &Hospitals( all) 9209 23,555 43,322 69000 (est.)
Beds (Private & Public) 117,198 569,495 8,70,161 1.9 million (est.)
Doctors(Allopathy) 61,800 2,68,700 5,03,900 12,01,354
Nursing Personnel 18,054 1,43,887 7,37,000 NA

Source: Census data, NHFS-4, 5


Public policies when correctly designed seek to address market failures. Government’s intervention is required only when the market is unable to address the aberrations caused in the market due to negative externalities like pollution caused by an industry, asymmetry in information between the buyer and the seller, existence of monopolistic tendencies or cartelisation or disruption in the delivery of public goods. Public goods are non-excludable and non-rivalrous, meaning the use of any public good by one does not exclude others from using the same and there is no supply constraints, like for fresh air. Public goods are also generally available to all either free of cost or at affordable costs, unlike private goods (groceries or durables) are excludable and rivalrous - they are priced and subject to the laws of demand and supply in the market. Public goods can be produced by private sector also, but left to private hands, they tend to be under-produced. Public health is both a public good and a private good — to the extent that it is preventive, it is a public good; it promotes habits and encourages behaviour that create a healthier population by reducing sickness. The healthcare services provided by hospitals, whether public or private, to treat diseases are not public but private goods. Providing clean water, clean air, proper sanitation and promoting healthy habits among the population are any government’s primary responsibilities. India has neither been able to ensure clean drinking water for most of its households, its towns and cities are among the most polluted in the world and the status of sanitation therein is pathetic. Swachh Bharat was probably the only programme of universal sanitation coverage that has succeeded in changing the behaviour of people to a large extent. However, there are many behaviour-related problems that cause negative externalities — for example, the winter pollution in Delhi due to the action of farmers in neighbouring states; in this case, as in many similar cases, state intervention has proved to be thoroughly ineffective to ensure fresh unpolluted air for the citizens of Delhi with deadly consequence for its children and the elderly.

When there is market failure that require state intervention, the toolkit available to the state to address the failure is rather limited - fiscal policy and regulation. While fiscal policy applies taxation to address the negative externalities, public expenditure can either create capacity to curb the monopoly power of private players or subsidise expenditure incurred in the private hospitals and clinics, either through insurance or through subsidised rates. These are the preferred modes of intervention of the Indian state. Regulation cannot be effective to address market power of monopolies in the absence of adequate state capacity, but can effectively address the other cause of market failure — asymmetric information. The unregulated private healthcare market in India is characterised by both asymmetric information and monopolistic tendencies. Healthcare has become a monopoly of private players since the state has abdicated its responsibility, forcing people to go to the private healthcare providers even when they cannot afford them. There are evidences of cartelisation as most private healthcare services are priced similarly regardless of their actual costs — the government exercises no regulation here. Some of them come at exorbitant costs — for example, before February 2017, a bare metal stent (BMS) used to cost Rs 45,000 and the drug eluting stent (DES) used to cost Rs 1.21 lakh before the National Pharmaceutical Pricing Authority (NPPA) put a cap of Rs 8,261 and Rs 30,080 for the BMS and DES respectively. There are countless examples of such exorbitant pricing prevailing in the market regardless of the cost of production. Pharmaceutical companies in India, like in the USA, constitute one of the strongest lobbies and determine market price of their products independent of government regulation and guidelines, and governments are hopelessly powerless to act against them. Besides, in the absence of state capacity to provide quality healthcare and affordable medicines at public hospitals and dispensaries, the market power of the private players cannot be curtailed by regulation alone.

Vijay Kelkar and Ajay Shah in their book In Service of the Republic: The Art and Science of Economic Policy (Penguin Allen Lane, 2020) cites the case of a doctor requiring a patient to undergo an MRI. The patient in this has no option but to comply. This is a classic case of extreme information asymmetry between the doctor and the patient where the patient does not know if the MRI was really required, or whether a cheaper test would have sufficed or if the laboratory conducting the MRI will pay a kickback to the doctor, as is common in India. As they write,

“Prices of healthcare tend to skyrocket when individuals are unable to engage in comparison shopping for healthcare services with predictability of expenditures. In a simple for-profit setting, the incentive of the doctor is not to heal the patient. The incentive of the doctor is to extract maximal revenue. Alongside this, it is efficient to make the patient feel subjectively better. This is done by over-prescribing antibiotics, by prescribing steroids (that briefly make a person feel better), by having a good bedside manner, by earning likes on social media, etc. Such strategies do not heal, but they generate more referrals. In a simple for-profit setting, there is no incentive for the doctor to guide the patient into pathways that prevent future requirements of healthcare. Public policy initiatives are required to address these market failures in healthcare.”

A few years back, in a premier private hospital in Kolkata, a friend was undergoing a cardiac procedure involving angioplasty. He was required to stay at the hospital for 7 days. Each day morning and evening a doctor would make the round of the wards. He would stop for a minute at the bedside of every patient and inquire about his health, wish “Good Day” and depart. While vising my friend at the hospital, I witnessed this myself. My friend’s condition never required the doctor to examine him medically or even change the prescription. However, at the time of his release, he found that each such visit was billed at Rs 800, the total for 7 days thus amounting to Rs 1.12 lakh for just saying a Hello. The hospital contended that it was worth the doctor’s time and had to be paid. There is no control on such unethical behaviour on the part of the hospital management and doctors. It is common knowledge that private hospitals and nursing homes put a target for each doctor to generate income by prescribing drugs, steroids, procedures and even operations that are completely unnecessary. The state not only exercises no control at all over such unethical behaviour that fleeces the hapless patients, but also encourages such behaviours by driving the patients to avail their services through insurance or subsidy.

It is of course incorrect to generalise and there are numerous private hospitals which strictly follow perfectly ethical behaviours and provides free treatment to poor patients - I personally know many of them. But the question is about the absence of regulation which is a state duty and which the state has singularly abdicated till now. As Kelkar and Shah said, the focus of health policy must be prevention — through immunization and control of disease vectors like mosquitoes, monitoring of epidemic outbreaks, in ensuring drug safety, food safety, air quality, water quality, waste management, disaster risk resilience, disaster response, etc., to address which system thinking is needed. They cited the example of the UK’s National Health Service where there is a General Practitioner (GP) who is assigned to each person. On average, there is one GP per 1700 persons, who is paid a salary and charges nothing to the patient. Her incentive is to keep the person healthy so that the person comes back to her fewer times, which is a “logical and simple design that generates the correct incentives for the GP”. They also noted that the sound operation of the UK NHS requires UK-style state capacity. If we are focussed, this may not be impossible to create. In a populous country like India, instead of a single doctor, we can create a network of doctors of hospitals — private and public both - tied to a patient where the patient can get treatments for life by paying a monthly sum every month, and government paying an equivalent sum.

Community based networks have worked wonders in many countries. In Thailand, rural community based networks take care of primary healthcare in rural areas through locally available medical professionals, while the provinces are arranged into different health districts - each district being responsible for about 3-6 million people living in the provinces close to home. Even without being an advanced economy, since 2002, Thailand has been able to provide free Universal Health Coverage to each citizen, funded by taxation. It has drastically cut down child mortality and “catastrophic health spending” including out of pocket expenses. Every Thai citizen is now entitled to benefits extending to essential services in preventive, curative and palliative care throughout their lives, and extension of coverage to high-cost services, such as renal replacement therapy, cancer therapy and stem-cell transplants, has improved financial protection for the patients.

Only system thinking and reengineering of our heath architecture and institution of a strong regulatory mechanism for the private healthcare sector can address our sick health system. But left to visionless populist governments, little improvements can be expected.

* (Author: Dr Govind Bhattacharjee, is a former Director General at the Office of the Comptroller & Auditor General of India, is currently a Professor of Practice at the Arun Jaitley National Institute of Financial Management.)

[1India’s health budget fourth lowest in world: Oxfam | India News - Times of India (

[2India (IND) - Demographics, Health & Infant Mortality - UNICEF DATA;

[3Shankar Aiyer, The Gated Republic, Harper Collins, 2020, p. 59-61.

[4Ibid, 61-62.

[6Shankar Aiyer, The Gated Republic, Harper Collins, 2020, p. 70-71.

[7Sub-centres cater to population up to 5000, PHCs up to 30000 and CNCs up to one lakh

[8NRHM would later be converted into National Health Mission (NHM) after including the National Urban Health Mission (NUHM) in 2013.

[9Shankar Aiyer, The Gated Republic, Harper Collins, 2020, p. 87.

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