April 2008

National Health Policy – Need for Reforms

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“Healthy people make a healthy nation and therefore health of the community is fundamental to social and economic development of a nation.”

Organisation of Health Services

Organisation and financing of healthcare services in a country depends largely on its economy & socio-political environment. Public policy determines the extent to which the health sector is funded and the manner in which the financial resources are collected, prioritized and distributed. Public policy also determines the level to which healthcare services are developed and the manner in which these services are distributed, delivered and accessed.

Planned Development         

Universal access to basic healthcare is not a fundamental right within our constitution. However, there have been many initiatives taken by the Government to achieve this laudable objective since the commencement of our planned development in 1952.

Primary care has been the basis of action and reaching out to the entire population with a comprehensive package of preventive, promotive and curative healthcare services has been the focus of public policy. Family welfare and assistance in attaining a small family norm has also been the thrust area of public endeavours.

Unfortunately the accomplishments of the health sector have remained short of the set objectives primarily due to the phenomenal growth in our population which has almost tripled from 39 million to 1.1 billion during the past 60 years of our independence.
 
Development Process

During the first three decades of our independence, development of healthcare services remained in the domain of public sector, primarily by reaching out to communities in their home environment with a package of primary and secondary care through establishment of a nationwide network of district and taluka hospitals, community health centers, primary health centers and sub-centres. Although the Central and the State governments played a pivotal role in developing and managing academic medical centres and referral hospitals in major townships and metropolitan cities, voluntary sector also played a complementary role in the establishment of such institutions for referral care, medical education and research by creating large endowments under tax shelter provided by the government on industrial income. The growth of for-profit private sector during this period was in the form of solo and group practices and small to medium sized nursing homes offering personalised care largely to urban population with the ability and willingness to pay for such services.

Economic compulsions and competing priorities from other sectors, both at the Centre and at the State levels, and virtual withdrawal of tax benefits for investment in healthcare in 1983, were a setback in this development process. Introduction of Mediclaim hospitalisation insurance policy by the Government during the same year to be offered by the four public sector insurance giants of the GIC, with the provision for tax exemption on the insurance premium rapidly increased the demand for healthcare, and thus started a new era of for-profit corporate hospitals setting the stage for a new initiative to fill the gap between the need and availability of contemporary healthcare.

This initiative was led by Apollo Hospitals and followed by many big players in the industry. Some of the major players engaged in the delivery of healthcare also migrated their healthcare endeavors from non-profit endowments to for-profit corporations just for the reasons of techno-economic viability and not necessarily with profit motive.

National Health Policy

In the midst of the above changing health scenario, the Central Government published the National Health Policy in 1983. Since this policy was focused on public initiatives to reach the entire population with a package of primary healthcare, it did not make any impact on the free market influence that had already set in to fill the gap between supply and demand of contemporary healthcare services in the country. The National Health Policy was revisited and rephrased in 2002 without any major change in its approach or policy structure.

The stalemate continued and the industry as well as financial institutions willing to invest in healthcare grappled with the changing dynamics and waited for a clearer picture to emerge, which would substantiate the predicaments with ground realities and establish the techno-economic viability of the healthcare industry in a free market. In the absence of any major policy initiative to encourage investment in healthcare and to facilitate speedy development of healthcare infrastructure in the country, the progress was very slow.

Free Market Dynamics

Healthcare is increasingly seen as a commodity and therefore health services has emerged as an industry. In a free market economy, the gap between demand and supply plays a significant role in the growth of the health sector. Healthcare, especially at the level of tertiary and quaternary care entails high capital and operating cost to create and maintain the infrastructure and to bring together high technology and clinical skills within an environment which is both capital and labour intensive. Therefore, it tends to become monopolistic with leverage to price discriminate. Since healthcare is credence good, the providers of care also tend to over provide especially when there are incentives for over provision and a third party to pay for the services rendered. Third party payers on the other hand tend to become monosonic on the strength of their risk pool and therefore leverage price competitiveness and manage financing and provision of care. These are two conflicting and competing environments where the payer or the beneficiary is not necessarily the gainer.

Last Decade

The last decade has witnessed maturation of the above analytical process and a virtual transition from a static sector to an increasingly dynamic and significant industry. Although, this change is a welcome sign for the industry, it is not necessarily the best available option within the overall national context, where public health and the physical and economic access to healthcare is a collective mission. A mission that ensures access to continuum of care from domiciliary through primary and secondary to tertiary care; provided within rural, semi-urban and urban environments; and accessible to the poor, the middle economic segments and the rich alike. A tall order!

Health Sector Reforms         

Since rationale of corporate investment is determined on the basis of RoI, which includes cost of prime land, contemporary infrastructure, state-of-the-art medical technology, promoters, public equity and institutional borrowings, and where capacity utilisation determines the potential to break-even within a reasonable period from commencement of operations, public policy plays a significant role in mobilising such investments, be it developing or developed economies; socialist or capitalist societies. India is at a threshold of becoming a global economy by the year 2020. Thanks to the initiatives of our policy makers for their foresight in implementing industrial and economic reforms and bring them to fruition. Since health is an integral part of the socio-economic development of the society, and since health of the population is a formidable economic resource, there is no justifiable reason to withhold health sector reforms in the country.

In the midst of this rapidly changing socio-medical environment in the country, and to facilitate universal and equitable access to basic health services, it is imperative that the policy maker address this issue of public significance and initiate health sector reforms to stimulate investment in healthcare, enhance the pace of development of healthcare infrastructure, and most significantly, foster public-private partnership to attain the above formidable national objective within a reasonable time frame.

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