The need for reforms in healthcare finance

The Centre and state governments are experimenting with several new and exciting ideas in healthcare reforms. What is missing, however, is a serious reform agenda for health financing. The last big reform was expanding the coverage of the Rashtriya Swasthya Bima Yojana (RSBY) from Rs30,000 to Rs1 lakh, reinforcing insurance as the long-term strategy for health financing. However, the experience of several countries has revealed that this is a perilous path—taking India towards a bad equilibrium. Depending on the route, India could end up spending either 18% of its gross domestic product (GDP) on health like the US or just 4% like Singapore to achieve similar outcomes.

However, these public health insurance schemes have not been associated with lower health burden for the average household as measured by total real out-of-pocket health expenditure, catastrophic health expenditure or impoverishment caused by health expenses. This is a long-term problem which the private sector and the government will have to grapple with perennially.