Even while pushing for doing away with cumbersome contracts to help ease of business and a scaling up of India’s innovation index, there is one area where the Economic Survey 2021 feels government should take more control—the healthcare sector.
The reason, in the year where a virus held centre stage, is pretty simple. According to the survey, India has one of the highest out-of-pocket-expenditures (OOP) when it comes to individual health spending, much higher than countries like China, Vietnam and Thailand.
“Increase in public healthcare spending to 2.5 per cent of GDP can reduce OOP from 65 per cent to 35 per cent,” said Chief Economic Adviser Krishnamurthy Subramanian, after unveiling this year’s Survey Report in digital form, ahead of the Union Budget presentation on Monday.
He also called for increased regulation of the private healthcare sector, by establishing a regulator. “A sectoral regulator to undertake regulation and supervision of the healthcare sector must be considered given the market failures stemming from information asymmetry.”
Overall, Economic Survey 2021 paints an optimistic picture for the Indian economy, predicting a growth of 11 per cent next year—despite an expected contraction this year which it estimates at 7.7 per cent. The Survey is gung-ho, even as it calls on the government to increase spending to revive growth, push for more structural reforms, improve the ease of doing business and invest more in improving R&D.
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Yet, when it comes to healthcare, the Survey adopts a more pragmatic, contrarian approach, advocating an increased focus that involves not just hiking spending, but also more government regulation. Considering that health is a state subject, the Survey calls on states to increase their spending to 2.5 per cent at least. It noted that states having higher per capita spending on health have lower OOPE. Rich states should especially taget increasing it to 2.5-3 per cent, as this can substantially reduce OOP to 30 per cent.
“Increased prioritisation of healthcare in the central and state budgets is important as it crucially impacts how much protection citizens get against financial hardships due to OOP made for healthcare. OOP for health increase the risk of vulnerable groups slipping into poverty because of catastrophic health expenditures,” the Survey notes.
Crucially, the Survey calls on the government to set up a regulatory body to monitor the burgeoning private healthcare sector in the country, “given the market failures”. It points out how, while India has some of the highest mortality rates due to poor quality health care, private hospitals who charge much higher than government hospitals do not translate to providing better care. This, even as the cost is in multiples, causing immense OOP strain on many, particularly due to the lack of transparent insurance coverage. For cardiac procedures, for example, you spend 7 times as much if you go to a private hospital.
For enabling India to respond to (future) pandemics, the health infrastructure must incorporate flexibility, as events requiring healthcare attention may not repeat in identical fashion in future, according to the Survey. The message is clear—the government needs to focus on healthcare, with the possibility of changes in regulation. “Laissez faire in healthcare may not be optimal,” quipped Subramanian.
