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: The introduction of health insurance via the Rashtriya Swasthya Bima Yojana is an opportunity for the government to make good on its promise to help the poor. However, it also requires government to face one of the hardest problems in health policy. On the one hand, protection from catastrophic loss—financial as well as health-wise—is an important responsibility of government. On the other hand, implementing publicly organised and funded health insurance is notoriously difficult everywhere—in rich and poor countries alike. By taking this issue on, government has set itself up for serious challenges. Some are universal and some uniquely Indian.
First the pro’s. For too long, government has followed the ‘conventional wisdom’ of the international health community by trying to provide cheap, universal, primary care. No doubt with the best of intentions, this leads government to address the only set of health problems for which there is a private market. As much as 80% of visits for healthcare are to the private sector.
Private care varies in quality (as does public—a topic in and of itself) but at least it exists. The highest priorities for government spending are those things that markets simply can’t do. In health these are: ensuring standard ‘public goods’, meaning things for which there can’t be a private market even in principle such as pest (‘vector’) control, sanitation, safe water guarantees and improved hygiene in lots of forms. This highlights one great failing of health policy in India. It has been too medically oriented and not health oriented. The vast majority of the progress in mortality, to levels we see here in India, in the west preceded contributions of medicine via public health measures and none of the medical care was publicly provided.
The second big ‘market failure’ in health is the systematic failure of insurance for large expenditures. The lack of insurance puts everyone at risk of financial disaster. Numerous studies in India and elsewhere report that a major fear of most people, especially the poor, is having to go into debt or sell assets such as livestock at short notice and low prices to pay for medical treatment. Treatment of this sort requires a hospital. No one sells a cow for a few tablets of antibiotics. Distress sales are a substitute for insurance for expensive hospital care in the private, and all too often the public, sector. The emphasis on primary care misses the...
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