Costing and financing strategies are the key to ‘healthcare for all’

Healthcare expenditure accounts for 9 per cent of global GDP and is seeing an increasing trend over decades. This has been broadly driven by economic growth, advances in medical technology and ageing populations.

The swing to onic and lifestyle diseases has led to increasing healthcare spend. This presentschallenges for governments across the world to contain the spiralling costs.

The quest for newer models and strategies to contain costs while ensuring provision of quality services to all has emerged a key policy challenge. The most visible example of this approach is the Affordable Care Act, 2010 (Obamacare) in the US.

Back home, economic advancement over the last two decades has enabled the government to take the cue and articulate its intent to increase public financing of health to 2.5 per cent of GDP from the current one per cent. This has to be achieved over the Twelfth Five Year Plan period to move toward affordable, accessible and quality health care for all. Further, the new Government is finalising a new health policy and with supporting schemes such as “Rashtriya Swasthya Bima Yojana” will likely embark on a Universal Health Assurance Mission in the near future.

Most policy interventions are due to the current healthcare status of the country which depicts a sorry state on access, quality and affordability aspects. India has just 0.67 beds per 1,000 population versus the global average of 3.6. In terms of manpower, India needs to triple the number of doctors, increase the number of nurses and midwives by four times and other allied healthcare personnel including paramedics by five times to meet the WHO standards.

On the affordability front, less than 30 per cent of the total population has any form of health insurance and over 60 per cent of healthcare spend continues to be borne out-of-pocket. Additionally, the quality aspect continues to be nebulous as less than 1 per cent of total healthcare providers are accredited by the NABH (National Accreditation Board for Hospitals and Healthcare Providers) and adherence to standard treatment guidelines is practically negligible.

This calls for well-thought-out and scientific costing and financing strategies. The current provider reimbursement methodologies are based on economics focused models like L1 based bidding which have to be transformed into metrics that accord maximum weightage to quality and patient safety aspects.

Already, perverse incentives for insurers and providers, cross-subsidies and moral hazards have contributed to increased costs. Ground reports depicting unnecessary procedures undertaken under various state sponsored health insurance schemes has taken some sheen off otherwise path breaking health security interventions. Therefore, we need a well defined scientific costing framework which demystifies the various elements of costing at every level and mode of delivery.

The framework should comprise three stages — defining cost elements at every stage through a standard template; determining actual costs; and evolving reimbursement rates based on cost elements, quantum of government grants and clinical advancements. Using insurance as a lever to improve quality and categorisation of providers based on quality and outcomes data would be critical in implementing this new costing framework. Additionally, implementation of standard treatment guidelines is essential to ensure predictability of outcomes and reduce unnecessary investigations.

Experience shows that a transparent costing framework is essential to avoid distortions and inefficiencies in health systems. Further, there are emerging trends in costing which measure outcomes and costs at the patient level with a given condition over a full cycle of care. India needs to evolve systems for optimal utilisation of limited resources.

For a costing framework to succeed in healthcare, which needs careful balancing, needed are increased research spend and advancement in medical technologies. Medical technology experts vouch that a dollar spent on research and innovation in health technologies has yielded $2.4-3 worth of economic output in terms of productivity and improved life expectancy over last two decades. Exorbitant real estate costs have also added a non-clinical aspect in healthcare costing.

Moreover, acute shortage of qualified clinical knowhow has led to escalating costs for providers. The challenge before policy makers and stakeholders therefore is to evolve a balanced framework which not only ensures efficiency of health systems to contain costs but is also flexible enough to assimilate advances in technology and clinical processes.

This brings us to the other policy imperative of financing healthcare. As per WHO national health accounts, India’s healthcare spending has reduced from 4.4 per cent of GDP in 2000 to 3.9 per cent of GDP in 2014 implying that healthcare expenditure has grown slower than GDP. Therefore, we need to revitalise a Public Private Partnership (PPP) engagement framework for quantum increase in access to quality healthcare services.

There is a huge scope for Build-Operate-Transfer (BOT) based PPP models, and annuity-based financing of hospitals in Tier-II and Tier III cities wherein the private sector can be allowed to set up medical colleges to partly address the shortage of clinicians.

The technical know-how and managerial efficiency of the private sector along with transfer of commercial risks to the latter will help develop a workable engagement model. The failures experienced in PPP should not dampen our enthusiasm for this mode as innovative financing models based on PPP alone have the potential to make a real difference in realising the dream of accessible and affordable healthcare for all.

The writer is Senior President and Global Convener, YES Institute