Why India needs a Publicly funded Universal Healthcare System

Posted on November 13, 2008


The “Healthcare in India: Emerging market report 2007” by PricewaterhouseCoopers is a good compendium of data on the current state of healthcare industry in India and likely trends.

Unfortunately the data in the report suffers from two problems:

  1. It does not cite sources for all the data quoted.
  2. I found major variations in at least one data point; the report uses 3 estimates of 650, 860 and 1500 for hospital beds available per million Indians.

To be fair, most data in the report like per capita income, healthcare spends in India, etc., are pretty consistent with other sources. I would not use the data in the report where I need statistically accuracy but use it for back of the envelope calculations.

It is ironical that while this report is intended to convey the enormous business potential of the Indian healthcare industry for private investors, for me it ended up strengthening my belief that India has to focus significant public investment on delivering healthcare to its million.

Just one example using the data in the report: India’s annual per capita income is about US$ 650 which translates to US$ 3900 of annual income for an average household of 6. The average annual cost to treat an Indian diabetic patient (both direct and indirect expenses) is US$ 420 per annum. This implies that an average Indian family with a diabetic member would spend a whopping 11% of its annual income, year after year, on just one medical problem. Remember these are averages; there are a large number of households that will be required to spend a much greater percentage of their income. Obviously a lot of the households don’t afford the expense and ignore taking care or medicines. Ignoring diabete can lead to blindness, amputation and even death and if the affected individual is the bread winner of the family, his or her losing a limb or dying can push the family into poverty and destitution. No wonder an estimated 20 million Indians slip below the poverty line each year as they cope with unaffordable medical expenses.

It does not matter what an household’s income is; there is always a chance of contracting that one disease or that one condition which will severely compromise the family’s financial well being – cancer, HIV, loss of limbs – the list is long. From the larger society’s perspective this is a double whammy as it not only loses a productive member but also is required to care for the destitute that he or she leaves behind. Remember every rupee spent on sustaining the poor (and I am not for a minute advocating that we don’t sustain the poor) takes it away from being invested in much needed infrastructure or security initiatives. Clearly both as individuals, that can contract a financial crippling disease, and members of a society, that aspires enhanced lifestyle, it is in our interest that we demand appropriate promotive, preventive, curative and rehabilitative healthcare services at an affordable cost.

One could argue that individuals should be conscientious and buy appropriate health insurance cover to protect themselves from the negative financial impact but study after study have shown that for-profit insurance companies fail miserably in protecting individuals from crippling negative financial impact of chronic or life threatening conditions. The reasons for this failure are a topic of a separate post. Suffice it to say most insurance companies either refuse to cover existing and/or chronic conditions (like diabetes) or charge such high premium for a universal cover, that individuals and households are in no better place for having bought the cover and incurred large recurring expenses ex ante than not having a cover and risking a large expense ex post.