Raise govt-spending to cut out-of-pocket expenditure

Economic Survey 2020-21 over Health Sector

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In News:

  • The Economic Survey 2020-21 has strongly recommended an increase in public spending on healthcare services.

Recommendations of Economic Survey 2020-21 over Health Sector

Covid brought focus on healthcare:

  • The Survey observed how the COVID-19 pandemic emphasized the importance of healthcare sector and its inter-linkages with other sectors, showing how a health crisis transforms into an economic and social crisis.

Importance of affordable healthcare:
  • The Eco Survey observes that the health of a nation depends critically on its citizens having access to an equitable, affordable and accountable healthcare system.
  • However, the Out-of-Pocket-Expenditure (OOPE) in India is very high, making up 65 per cent of the overall healthcare spend.
Note: OOPE refers to people spending their own money to get treated. 
  • The Survey also underlines that OOPE for health increases the risk of vulnerable groups slipping into poverty because of catastrophic health expenditures.
  • The Survey noted that India has one of the highest levels of OOPE in the world, contributing directly to the high incidence of catastrophic expenditures and poverty. 

Key government initiatives on heatlh:
  • The Survey noted that the National Health Mission (NHM) played a critical role in mitigating inequity as the access of the poorest to pre-natal/post-natal care and institutional deliveries increased significantly.
  • It also applauded that Pradhan Mantri Jan Arogya Yojana (PMJAY) has been a marquee evolution in the direction of providing financial affordability to a large percentage of the Indian population.

Recommendations on health:
  • The Survey said that India’s health infrastructure must be agile so as to respond to pandemics.
  • It emphasized that NHM in conjunction with Ayushman Bharat should continue.
  • Telemedicine needs to be harnessed to the fullest by investing in internet connectivity and health infrastructure.
  • Adoption of telemedicine will help in meeting the last-mile challenges of healthcare delivery in the country. 
  • The survey recommended taking advantage of technology-enabled platforms coupled with digitization and artificial intelligence at-scale.

Important to increase public spending on healthcare:
  • The Economic Survey 2020-21 has strongly recommended an increase in public spending on healthcare services from 1 percent to 2.5-3 percent of GDP, as envisaged in the National Health Policy 2017.
  • The survey noted that the life expectancy in a country correlates positively with per-capita public health expenditure.
  • The Out-of-Pocket-Expenditure (OOPE) as a share of total health expenditure drops sharply when public health expenditure increases.  
  • The Survey noted that increase in public expenditure on health to 2.5-3% of GDP could bring down OOPE from 65 per cent to 35 per cent of the overall healthcare spend. 

Regulator for health sector:
  • The Survey recommended a regulator for the healthcare sector considering the market failures stemming from information asymmetry.
  • Asymmetric information theory suggests that sellers may possess more information than buyers, skewing the price of goods sold.
  • For instance, if people are not well aware of insurance practices, they might be paying more premium that needed.
  • Mitigation of information asymmetry will help lower insurance premiums, enable the offering of better products and increase insurance penetration.

Shaping the structure of the healthcare market:
  • The Survey importantly observes that countries with more fragmented health systems tend to have lower performance as reflected in higher costs, lower efficiency, and poor quality.
  • Therefore, a key role for the government is to actively shape the structure of the healthcare market.

Also Read: 75m Indians above 60 suffer from chronic disease: Survey

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