Vouching for health vouchers

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The healthcare system in India is very complex and there is a clear rural-urban divide. In urban areas there is a wide variety of healthcare services including high-tech hospitals and diagnostic centres while in remote villages people have to depend on faith healers, quacks, and barefoot doctors (village health guides) for healthcare. The irony is that medical tourism in India is getting popular with patients from other countries, but our own citizens do not have proper access to basic healthcare services. On the other hand government is finding it difficult to meet the costs of ever increasing public expectations for health services.

Individuals have to spend a large amount of money on healthcare in case of any disease. People suffering from chronic disease are driven into penury due to the heavy cost burden of ongoing healthcare. At the same time, large sums of money are being wasted on government dispensaries and hospitals which do not function efficiently. Thus there are socio-economic inequalities in access and utilisation of health services and also in outcomes. What are the reasons for this fiasco?

The reasons are complex, but one important reason is that government has not been able to provide health care services to the poor directly. The absence of proper targeting of the beneficiaries dilutes the impact of public expenditure on health services. In addition to this, the poor do not get the benefit due to leakages. The government provides supply side subsidies that cover some or all costs of inputs for health services, but it provides little incentive to attract patients or improve productivity as limited resources get thinly distributed. As a result, public service providers get insufficient funds to function. This leads to poor quality healthcare and under utilisation of public health services.

With the depleting quality of healthcare in public sector, the demand for private healthcare delivery is rising and it is resulting in an overall increase in prices of health care services in the country. On the other hand the public services are under-utilised. What can be done?