Free and Public

An odd one out or part of the same system? By Mohga Kamal-Yanni, Senior health policy advisor, Oxfam

“It was a business decision. It was about money. And screw you.” - A journalist said after talking to Martin Shkreh the CEO of Turin, the US-based pharmaceutical company. The company shocked the US when it raised the price of daraprim, a 62 years old medicine by 5000% from $13.5 to $750 per tablet. The US Pharmaceutical companies association (PhRMA) was quick to tweet that “.@TuringPharma does not represent the values of @PhRMA member companies.”So is PhRMA right?

In reality Turin represents a typical symptom of the same disease: putting profit before patients. Otherwise how can we explain the escalating price of new (and sometimes old) medicines not only in Europe and US but also in low and middle income countries? Take Gilead’s medicine that cures hepatitis C as an example. Sofosbuvir (marketed as Sovaldi) was launched at $1000/pill/day. Even at the reduced price offered to some countries, the price is too high. We estimated that treating just half patients suffering with hepatitis C would have cost the Egyptian ministry of health nearly two thirds of its budget.

New cancer medicines are reaching the market at exorbitantly priced and thus unaffordable in most countries even in Europe and the US. NICE, the body that advises the UK’s NHS on medicines rejected Roche’s breast cancer medicine trastuzumab emtansine (Kadcyla) not because of ineffectiveness but because of its high price. Needless to say the price is far beyond the dreams of patients in developing countries.

Patients and advocates for access to medicines have been campaigning on access to medicines in developing countries for years. Their success is clear when the price of the anti-HIV cocktail dropped from US$ 10,000/patient/year to around US $100. Now similar actions have started in rich countries too. One of these groups sent a letter to Jeremy Hunt the UK secretary of health urging him to issue a compulsory license that enables the importation of cheaper versions of the same medicine so that women are not denied a life saving treatment.

Having “temporary” monopoly over pricing seems to be not enough for pharmaceutical companies. Pharma lobbyists carry significant influence in the corridors of power pressurising governments to design and enforce rules that exceed what is already agreed at the WTO through the TRIPS[1] agreement.

Intense lobbying to increase intellectual property rules in free trade agreements has created global public anger. Last September a cancer patient was arrested when she was accused of disrupting the negotiation of the Trans-Pacific Partnership (TPP). The recently concluded TPP negotiations were carried out over more than five years in secret and the text will only be available for elected bodies and the public when it is ready for signing.

Free trade agreements (FTAs) like the TPP are notorious for expanding corporate powers at the expense of public health and the public interest. For example, the FTAs allow corporations to sue governments over measures to promote access to medicines (such as price controls, reimbursement decisions, marketing approvals, and drug safety decisions, or stricter patentability standards). Corporations argue that such measures would damage their investments, which they insist must be protected by the FTAs. This is already happening as Eli Lily has taken the Canadian government to court over government action to make some drugs affordable.

Similar damaging FTAs are currently being negotiated –also behind closed doors- between the EU and Thailand, India and the US.

Moreover, when developing countries try to use legal tools to control or decrease prices, they are put under huge pressure from rich countries under the influence of ‘big pharma’. When Thailand issued compulsory licensing for key medicines to treat HIV and cardiovascular diseases, ‘big pharma’ launched intense pressure on the country to revoke the decision. Under the influence of ‘big pharma’, the US trade representative put Thailand on the Special 301 ‘Priority Watch list’ of countries, which subjects countries to extreme pressure from the US government. Pharma’s influence on the EC resulted in pressure from the European Commission on the Thai govt to change its decision.

Recently some Members of US congress wrote to the US administration urging it to put pressure on India to change its national intellectual property law in order to strengthen monopoly protections on pharmaceuticals. The law had previously been challenged in court by one pharmaceutical company but the court turned the claim down. Changing the Indian law by increasing intellectual property protection will deprive patients from access to needed medicines not only in India but also in the rest of the developing countries. India is considered “the pharmacy” of developing countries.

The root of the companies’ monopoly power and influence is the current model for funding for research and development (R&D) of medicines. Pharmaceutical companies justify the high prices of medicines by the need to recover the R&D costs. Yet the actual cost of R&D is kept as a big secret by the industry. In reality it is becoming increasingly clear that medicine pricing is not determined by production costs and a profit margin, but by what the market can bear.

Clearly the current R&D system is failing patients and health providers all over the world. It is high time that global leaders work for an alternative system that separates the financing of R&D from pricing the resulting medicines. It cannot be left to the pharmaceutical industry to cater only to those who can afford to pay high prices- practically deciding who lives and who dies.


[1] Trade Related Aspects on Intellectual Property Rights



Dengue in Delhi – fighting an outbreak with the wrong numbers and an unwilling private sector by Anna Marriott, Public Services Policy Manager

A recent dengue outbreak in Delhi has once again revealed the shortcomings of the massively underfunded Indian public health system, alongside the unacceptable and illegal exclusion of poor patients by the city’s private hospitals. This blog steals the excellent analysis by my colleague Oommen Kurian from Oxfam India, recently published in the British Medical Journal, as well as the post-dengue prognosis of well known commentators, Reddy and Murphy.

Oommen Kurian’s BMJ blog outlined how the current dengue outbreak in Delhi came to international prominence following the unfortunate incident of a young couple who committed suicide after their son was rejected treatment by many prominent private sector hospitals in Delhi. Treatment was denied despite the government saying on 28 August that patients should not be denied admission to hospital on account of a lack of beds. Responding to such cases, the Government of Delhi has issued show-cause notices to five private hospitals asking them to explain why they refused to admit the boy and why their registration should not be cancelled.

Kurian’s blog focussed primarily on two major problems:  the shamefully inaccurate ‘official’ data on incidence and deaths from dengue fever, and inappropriate profiteering by Delhi’s private health sector during the Dengue outbreak. Reddy and Murthy, two prominent commentators, also argue in their post-dengue prognosis that once the media hype and finger pointing of the current dengue fever crisis passes, citizens of India are left with the same long-term problem of a chronically underfunded public health system that causes unreported tragedy on a daily basis.

The numbers

Kurian’s quick comparison of different sources of data on deaths from dengue fever show that only 29 of the 1221 deaths from dengue registered in Delhi between 2010 and 2014 entered the official system (see graph below). Official estimates of the annual incidence of dengue fever nationwide are a staggering 282 times lower than the actual number.

Dengue fever affects most of the metropolitan cities and towns in India, where the healthcare delivery systems are better than the rural areas. However, the preparedness of the system against it may be impacted by the level of massive under-reporting of cases and deaths.

Profiteering or serving?
Delhi has a large number of private hospitals, which have received free land and other subsidies from the government to provide a set percentage of their services free to poor patients. Over time, these charitable hospitals have become purely commercial entities, dishonouring the commitments made to the government.

A high level committee assigned by the Government of Delhi, headed by Justice AS Qureshi, took a bleak view of the nature of such hospitals which claim to be charitable just to lap up subsidies and have become “selfish, greedy, and exploitative” moneymaking machines. Data from 2014 show that the average total medical expenditure for treatment per case of hospitalisation is higher in Delhi than any other state in India, at Rs 34,658. The India average is Rs 18,268.

Profiteering in times of distress is nothing new to Delhi’s private health sector: even those which claim to be private “charitable” hospitals are notorious. For these very reasons, midway through the dengue outbreak, the Union Health Ministry decided to ask the Delhi government to take action against any overcharging by the private hospitals. On 16 September, Delhi’s Directorate of Health Services issued an order against private hospitals and laboratories overcharging, and implemented ceiling prices for dengue testing. Another advisory on the same day allowed the private hospitals and nursing homes to increase their bed strength by up to 20 per cent on a temporary basis for two months.

And now?

As of 21 September this year, the press has reported that while the death toll has “risen” to 22 this season, the deputy chief minister announced that the health situation is now better and the government is winning the battle against dengue. Activists do not take these numbers seriously. Advocate Ashok Agarwal, a member of a Delhi high court-appointed panel to oversee the implementation of the EWS scheme (beds reserved for patients from “economically weaker sections”) in private hospitals announced on social media that the Delhi Government’s dengue death figures are incorrect and that 23 dengue deaths have happened in one hospital alone. The director of another hospital in Delhi is on record saying that at least seven dengue deaths had taken place in his hospital alone, as of 17 September.

A look at civil registration data reveals that dengue strikes Delhi at regular intervals. With more money already put into health, the current Delhi government—only in its first year of rule—may be better placed to fight any dengue outbreak in the future. However, any effort towards containing contagion should begin with having correct numbers—of cases and deaths—and a long term plan to align the private sector in the state with the broader public health goals of society.

Once the current media hype has passed….

In their post-dengue prognosis Reddy and Murphy write that there is ‘justified outrage at the tragic deaths of children from dengue under deplorable conditions of apathy and neglect in the capital of India. But say the underlying causes of the crisis, namely chronic and long-term underfunding, poor co-ordination and planning, remain unaddressed and the daily tragedies facing citizens in the rest of the country, especially in rural areas, go unreported. They give the heartrending example of a tribal in Odisha who allegedly felt forced to sell his two-month-old son for Rs 700 to buy medicines for his sick wife. Reddy and Murphy conclude that:

Public health systems cannot function as a motley crowd of disconnected actors ad libbing their way through an unscripted play in chaotic fashion. The different actors involved require a script, coordination, direction, and need to work as a team. It is time India got its act together to create strong, well-resourced, responsive and responsible health systems. Or else, terrible things will continue to happen to innocent children, expectant mothers, poor tribals, disabled persons — and to your family and ours. We will all be responsible when such terrible wrongs happen.


Oommen C. Kurian is research coordinator, Oxfam India.

K Srinath Reddy is president and N R Narayana Murthy is chairman of Public Health Foundation of India



Ensuring universal health coverage for the informal sector, poor and vulnerable groups

Early September, the East Mediterranean Regional Office of the WHO (EMRO) held a regional meeting on Expanding Universal Health Coverage to the informal sector, poor and vulnerable groups in September in Cairo. The meeting was one in a series of the EMRO strategy to support countries in implementing universal health coverage (UHC).

The aim of the meeting was to help countries devise national roadmaps to expand health coverage to the populations that face hardship in accessing healthcare. This aim was to be achieved via sharing global, regional and country experiences in advancing UHC, exploring political processes and structural and cultural factors involved and promoting a better understanding of UHC monitoring. This blog covers a number of key issues that were debated during the meeting.

The informal sector, poor and vulnerable groups

There was a debate about definition and identification of these populations. The region has groups such as migrant workers in the Gulf States, who may not fit with the ILO definition of the informal sector. The region also hosts millions of refugees, some of which maintained that status for decades e.g. Palestinians in Gaza, while millions of Syrian refugees are now living in Lebanon and Jordan.

Vulnerable groups are sometimes “unseen” and therefore their needs are not addressed. These include disabled people, especially those with intellectual disabilities, female and children headed households and street children. In general the informal sector population makes up the majority in most countries and therefore their health coverage has to be at the heart of any plans for UHC.

Country capacity to identify these populations is weak and the politics of targeting is complex and may have political cost. The real question is about the cost-effectiveness of governments’ focusing on identifying and registering populations in order to target services versus national funding of a basic benefit package that is available for everybody where all sectors of society can benefit.

Health financing in the region

The region is classified into three groups: group 1 comprises high-income countries e.g the Gulf States, group 2 are middle-income countries including Egypt, Iraq and Morocco. The third group of low-income countries includes Afghanistan, Somalia and Djibouti.

The percentage of government spending on health to total government expenditure in EMRO’ low and middle-income countries (LMICs) is low: on average 8% compared to the global average 11%. Out-of-pocket (OOP) spending is very high in the region even in countries that have health insurance schemes, leading to poverty and financial hardship. For example despite high insurance coverage in Iran, OOP represents 52.1% of the total health expenditure.

There is a recent interest in implementing or expanding existing social health insurance (SHI). Yet countries which have made progress towards UHC have relied on government funding. For example, Turkey introduced a Green Card to cover the informal sector, 70% of its costs is covered [1]by the government. This was accompanied with increased public expenditure on health. Turkey is merging the SHI and green card financing in order to provide a comprehensive package. The result is decreasing OOP to 17%.

Most social insurance schemes work separately and cross subsidisation is rare. Multiple schemes build inequality via different premiums and benefit packages and it is difficult to harmonise the schemes.

A number of countries and especially high-income countries choose a model of health insurance and are trying to extend premium payment and coverage to migrant workers. Private insurance is increasing in some countries such as Jordan where 25 companies provide private insurance. However there is no data on the effectiveness, efficiency and equity of the schemes.

Low-income countries are struggling to provide UHC. As aid- dependent countries there are questions about the responsibility of donors for long-term predictable financing to build strong public health sectors in these countries.

The evidence and discussions during the meeting clearly illustrated the fundamental role of government financing of health care to extend UHC to the informal sector, poor and vulnerable groups.

Delivery of healthcare

Reliance on the private sector to deliver healthcare is widely spread in the region. The range within the private sector varies from unqualified, unregulated provider to five-star hospitals – also often unregulated.

While there was near consensus at the meeting on the necessity of public financing to cover poor people, the informal sector and vulnerable groups, there was no consensus on modes of delivering the service. The role of the private sector was mentioned as “important” without defining that role. Yet evidence from successful countries such as Thailand and Sri Lanka show the importance of a strong public sector in providing UHC and the limited role of the private sector in achieving that goal.

Some commentators also suggested that separating purchasing from provision was an important part of extending coverage. However, there was a warning of the lack of evidence that such a split is more effective or more efficient in delivering health care than the direct financing and delivery within the public sector, and that indeed, often the reverse is true.

Questions were raised about governments’ capacity to manage contracts with and to regulate the private sector. Even high-income countries such as Australia face huge questions around whether the public are getting a good deal from the private sector. The South Africa experience shows the difficulties in regulating the escalating cost of the private sector. 80% of South Africans rely on the public sector. The private sector services 20% of South Africans yet consumes 60% of the total health spending[2].


There was general agreement during the close of the conference that country experiences point to a number of essential ingredients for expanding UHC to cover the informal sector, poor and vulnerable groups including:

  1. Strong political will: health was a political priority in countries that progressed towards UHC. Public demand (in Turkey) for healthcare was also influential in getting government’ commitment
  2. A “new” consensus that poor people, even collectively, cannot pay for their health care. UHC requires predominately public funding in a big pool (e.g. from tax). Extensive pooling leads to maximum redistribution of resources. No country has ever achieved UHC without heavy public expenditure. Even rich countries such as Japan, Germany and France increasingly rely of budget subsidy. Some commentators concluded from the World Bank study that Thailand and Mexico need to follows the example of Portugal and Spain by eliminating payroll payment and opting for tax finance. Chile has succeeded by delinking entitlement from the employment status
  3. The priority of UHC is providing services for the entire population then incrementally increase the scope of those services
  4. There are two ways to finance UHC: a) a functioning National Health Service based on tax financing, or b) public financing (budget transfer) into a national SHI to cover informal sector, poor and vulnerable groups. An important starting point is providing a standard package through all schemes whether based on insurance or public funding
  5. Financial accessibility is a necessary but not sufficient for UHC. Quality of service is of equal importance
  6. Countries’ claims of increased population coverage need to be backed up by objective assessments, in terms of: enhanced financial protection and quality and effective service coverage


[1] Country presentation at EMRO meeting in Cairo

[2]Country presentation at the EMRO meeting in Cairo



Healthcare for all in India: Is dependence on private sector and insurance the way forward? By Oommen Kurian, Research Coordinator, Oxfam India

India’s health care delivery system portrays many contradictions. Enthusiastic policy discourse on Universal Health Coverage (UHC) and user charges co-exist. Grand plans for international health tourism focusing on super-specialty hospitals in the cities are made, while health payments push 60 million Indians below the poverty line every year. The overall public expenditure on health is at just over 1% of GDP but more budget cuts and insurance-based financing are being proposed. Oxfam India’s new Working Paper, “Financing Healthcare for All in India: Towards a Common Goal” highlights some of these contradictions and explores the challenges facing India’s health sector.

Sengupta (2013) observes that one reason for the unified support of UHC among international agencies was the global rise in catastrophic Out Of Pocket Spending (OOPS) on healthcare. This is in the backdrop of crumbling public health systems, which in turn was a consequence of a prolonged period of neglect of public healthcare and privatisation of health systems, as prescribed by the World Bank reports in 1987 and 1993.

Because of the devastating effects of payments during health shocks, OOPS became politically untenable and UHC was seen as a solution. Evidence of adverse effects of user charges was mounting too.   In a way, for many international institutions, promotion of UHC meant a reversal of some of their previously held policy positions.

In 2014, the World Bank president Jim Yong Kim admitted : “There’s now just overwhelming evidence that those user fees actually worsened health outcomes. There’s no question about it. So did the bank get it wrong before? Yeah. I think the bank was ideological”.

Unfortunately, this new consensus has not yet shown much policy impact in India. The Indian public healthcare delivery system still has user charges, and exemptions for low-income groups are known to be extremely ineffective. The system is also being pushed towards an insurance-based model, which promotes private sector providers. Reportedly, India’s efforts towards UHC is to be based on the experience of Rashtriya Swasthya Bima Yojana (RSBY)- an insurance-based scheme targeting households below the poverty line.

This centrally sponsored scheme – which has been in operation for seven years – gives selected poor families (up to five members) an annual coverage of up to $470 worth of secondary level care for an annual fee of less than half a US dollar. RSBY, and several similar regional schemes operating in the last ten years have failed to significantly expand coverage – official data just released indicate that as much as 86% of the rural population and 82% of the urban population are still not covered under any government sponsored insurance scheme.

Despite the inconclusive and generally negative evidence on its impact, the high praise given to RSBY and other health insurance schemes by influential agencies including the World Bank and the International Labour Organisation (ILO) has contributed significantly to its policy popularity. An Oxfam paper described such praise as “both premature and dangerously misleading”.

Evidence-based policymaking?

Despite the popularity of government- funded insurance schemes at the highest levels of policymaking, there is resistance within the government structures to objectively evaluate the performance and impact of the schemes. Fan and Mahal (2011) observed that politicians and administrators often presume that independent evaluations cause more damage than benefit, and governments in India are known to be hesitant towards conducting independent evaluations of health insurance schemes such as RSBY. It is often claimed that some “rigorous assessment” of its impact is done, but RSBY shares the scheme data “only with a carefully selected group of researchers” – this lack of transparency prevents public scrutiny.

Until now there is no disaggregated data available on government’s reimbursement to the health providers through RSBY. Simply put, we do not know how much money is going to the private sector, or how much is flowing back to the public sector. After it was quoted as a successful international UHC case study, and a potential model to expedite India’s UHC, the RSBY data portal stopped uploading even the basic state level data, which was being infrequently updated earlier.

The latest data available on the portal is from the first quarter of 2014. The latest evaluation published is from the first quarter of 2013. For many states like Bihar, latest data from many districts are from 2012. The allegation that RSBY is a private sector subsidy scheme still stands, particularly in the light of high prevalence of corruption and the limited or even negative impact that the scheme seems to have on OOP spending.

In the light of latest government’ evidence showing that a decade of promoting health insurance schemes across the country has resulted in only about 12% urban and 13% rural population getting covered, there is dire need of a rethink about how India can really achieve UHC. It needs to start with strengthening the public system that India already has rather than reinventing the wheel.



Examining evidence: the private for-profit healthcare sector and Universal Health Coverage (UHC) Jessica Hamer, Health Policy Adviser, Oxfam GB

On 2nd July 2015 at the International Conference on Public Policy (ICPP), Oxfam, together with Dr. Anuj Kapilashrami of the Global Public Health Unit, University of Edinburgh, convened a session entitled ‘Private sector and Universal Health Coverage: Examining evidence and deconstructing rhetoric’.

As an earlier blog explained, the session aimed to look at new and existing evidence on the role of the private for-profit sector in health, and to critically evaluate this in the context of achieving UHC in low- and middle-income countries. The five papers presented at the session looked at a wide range of private sector actors in health care delivery but raised a number of common themes and challenges.


High costs, and continued challenges around out-of-pocket spending (OOPS), was a common theme across the papers. One paper presented by Asha Kilaru, examined state insurance schemes in Karnataka, India, and found that OOPS were prevalent across the schemes, even where all costs should be covered. The study found 93% of those insured by at least one government scheme sought care from a private hospital, but only 8% reported receiving completely free care. Where healthcare was provided for free, additional costs (such as multiple hospital referrals for different tests and treatment) meant OOPS still occurred.  It seems that this was a problem particularly associated with private provision of healthcare, as evidenced by one respondents’ interview:

‘Only the operation [C-section] was free. At the government hospital, a C-section would be only Rs3-4000, but we went to a private hospital since we had insurance and wound up spending so much. It seems like government are agents that send us to a private hospital. In this yojana [Yeshasvini insurance scheme] the government spends and we also spend’.[i]

Difficulties faced in controlling the level of fees charged by private providers were also highlighted. In a paper by Jane Doherty examining the for-profit private healthcare sector in East and Southern Africa, it was noted that out of sixteen countries, ‘no country places a ceiling on the prices that its private hospitals may charge’ (although there may be some limitations to reimbursement payments made by insurers in two of the countries). The paper also explained that ‘there is little control of the fees charged by health professionals or limits placed on their total incomes, except in Kenya’.

Equity and access for the poorest

Challenges in controlling OOPS and the overall costs of private healthcare present significant obstacles to achieving UHC, and especially to ensuring access to healthcare for the poorest. Another recurring barrier to equitable access highlighted is the location of private services. A paper mapping India’s private healthcare provision by Mukhopadhyay et al highlighted that urban, metropolitan areas benefit from the majority of private hospitals, while in rural areas, disproportionately populated by poorer people, the private sector is largely comprised of individual practitioners. Moreover, almost half of India’s private hospitals were located in cities with a population of more than 5 million. Mumbai alone has 16% of all India’s private hospitals.

Poor quality and regulatory challenges

Usar’s paper investigating perceptions of shops selling medicines in Nigeria highlighted major concerns around their ‘pervasive regulatory infringements’ – and especially the selling of drugs beyond the scope of their licenses – as well as the lack of training of staff. The same paper pointed to the challenges of regulating medicine vendors in Nigeria in order to improve their quality, highlighting that regulation has been constrained by inadequate funding, weak institutional capacity, the often-remote location of the shops, and inter-regulatory agency conflicts.

Doherty’s research examining East and Southern Africa’s for-profit private providers pointed out that both an absence of regulation, and poor enforcement of regulation where it exists, contribute to problematic dynamics around private sector healthcare actors there. We have already heard how little legislation exists to control costs within the sector, but the study also found that that there is almost no regulation that guards against anti-competitive behaviour. Furthermore, ‘there is little monitoring by governments of quality and health outcomes, or attention to how the private health sector supports national health objectives’.

The same paper flags additional challenges to regulation, including patchy regulatory frameworks, the high cost of introducing new regulation, limited available information on the private sector, and the resistance of key stakeholders to regulation, or their “capture” of regulation to safeguard their own interests. In South Africa, for example, attempts to regulate dispensing fees for pharmacists have been resisted heavily.

Impact on the public system

Doherty concludes that ‘legislative gaps and enforcement problems, together with the fact that prices are not contained in any meaningful way, either through price controls or active reimbursement mechanisms, mean that for-profit private care in the region is likely to become increasingly unaffordable for any but the wealthiest’. Yet, if the for-profit private sector is poorly regulated and potentially growing, what impact could this have on the public health system left for the majority of the population?

Doherty points to South Africa as an example, where one impact of a strong private sector has been the ‘brain drain’ of human resources away from the public sector to much more lucrative private providers. The final paper by Jisha C. J., examining a state health insurance scheme in India (Kerala), highlights an additional worrying trend, where some private hospitals register in the state insurance scheme, only to de-register themselves once they have attracted some new patients to their facility. It can be assumed this trend will waste public resources spent on administration, as well as raising serious concerns about both equitable access and the behaviour of private providers.


The evidence presented at the Oxfam-University of Edinburgh session makes a further contribution to the debates over the role of the private sector in achieving UHC. While the papers can only shed light on the specific areas they analyse, it is clear that the wider themes they highlight chime with the findings of broader studies on the comparative roles of the public and private sectors.

Oxfam hopes to continue these discussions further, and will be hosting additional blogs on Global Health Check from the contributing authors and discussants exploring the details of the evidence presented in the coming months.



[i] The paper notes that ‘while it is claimed that [the] Yeshasvini [scheme] is self-funded, it received Rs. 40 crore as a government grant in 2012-13 and Rs. 45 crore in the 2013-14 budget’. Rs 40 crore is equivalent to more than USD 6 million while Rs 45 crore is equivalent to almost USD 7 million.



Financing for development: More money into India’s public healthcare system by: Oommen C. Kurian. Photo credit: Srikanth Kolari


Out of pocket (OOP) expenditures push an estimated Sixty million Indians into poverty every year.

As the Financing for Development Conference in Addis Ababa ends, we present the case for financing health care in India. India is losing vast sums of potential tax money that could finance universal health coverage (UHC) while at the same time decreasing the health budget and promoting private finance and delivery of health services. A recent Oxfam India paper explores available evidence around financing healthcare for all in India and offers recommendations.

1.    The potential for tax funding

Free services like healthcare and education are vital to fight poverty and inequality yet India is being denied the resources to fund them. The International Monetary Fund (IMF) estimates that developing countries are three times more vulnerable to base erosion and profit shifting activities[1] of multinational companies- they lose 0.84% of GDP in the short run, compared to 0.23% lost by OECD countries. Recent research covering 1500 Multi-National Companies (MNCs) in India showed that those with links to tax havens reported 1.5 % less profit than those with no such links – a strong indication that the former are engaged in profit shifting (a global euphemism for cheating) more intensively than those with no tax haven links.

A study in 2013 showed that according to official sources, the amounts involved in mispricing –manipulation by over-invoicing of imports and under-invoicing of exports- in India ran at US$8.1bn in 2010-11, escalating to US$12.6bn in 2011-12. Corporation tax of 33% on these amounts would have provided US$6.9bn that could have helped fund free quality public services for all in India.

The Indian government can raise funds to invest in public services from a better tax system. The latest report from Global Financial Integrity lists India among the top five countries in the world with almost half a trillion dollars lost in illicit outflows in the past decade alone. Just to compare, India’s annual central expenditure on health and rural housing put together is $ 5.4billion.

India’s tax to GDP ratio is among the lowest of all G20 countries- far below other BRICS countries (Brazil, Russia, India, China and South Africa). Moreover, the revenue foregone due to tax exemptions by the central government is estimated to be 43.2% of total tax revenue for the year 2014-15, or nearly 5% of India’s GDP. This shows that there indeed are alternative sources that can generate more resources for health.

2.    Current financing model and the impact on service use

Yet in India, there are extremely worrying trends of budget cuts and a focus on insurance as the way to achieve UHC.

Out of pocket (OOP) expenditures push an estimated 60 million Indians into poverty every year. User charges still remain in the public healthcare system. The overall public spending hovers at about 1% of GDP – the corresponding figures are around 4.5% for Brazil and 8% for the United Kingdom. During 1986-87, about 60% of the hospitalised cases were treated by the government institutions in urban and rural areas. In 2004, this figure fell to about 40%, reflecting the poor public spending on health[2]. Fortunately, the following decade saw focused attention on rural areas through increased health spending on improving infrastructure in rural India, which is slowly yielding results. Most deliveries across urban and rural areas are now taking place in government hospitals as the following chart shows.

This is a remarkable result given that government funded schemes across the country offered incentives to deliveries in private sector facilities. It shows that people’ trust in the public sector has improved.

Deliveries in Government Hospitals in India as a Percentage of Total (Sample Registration System, India)

The shift towards demand side financing was based on a rationale from survey findings during 1987-2004. The argument that even the poor preferred the private sector by 2004 however ignores the fact that this was a period when the public sector was systematically starved of resources and market principles were introduced into the system. Forgone care due to financial reasons had doubled between 1986-87 and 2004, from 15% in rural and 10% in urban areas to 28% and 20% respectively. Data for more recent years will be available by next year.

The spending cuts on public services in the central budget of 2015-16 are deeply concerning. Not only was the total allocations for health cut by about $945 million, but other budget cuts would affect peoples’ health too. For example the allocation to the child nutrition scheme was cut by half. At the same time, according to latest available estimates, 48% of children under the age of five are stunted due to chronic under-nutrition, with 70% being anaemic.

3.    Where the money should be spent: The privatisation trend

Unfortunately, there seems to be a trend against expansion of public sector provision of service especially from influential think tanks such as Niti Aayog, which just replaced India’s Planning Commission[3]. A recent book co-authored by Niti Aayog Vice Chairperson advises against any further expansion of free primary, secondary, and tertiary health care services in the public sector. Instead, it advises the government to focus on providing financial resources to the poor so that they can buy services. It even calls for the government to insist on full cost recovery.

Niti Aayog’s latest Working Paper on financing healthcare too veers dangerously towards privatised financing for health care which excludes poor people; unsustainable programs based on Corporate Social Responsibility and Public Private Partnerships (PPPs) without examining the evidence of effectiveness or problems of any of these approaches.

4.    Recommendations

The Oxfam India paper makes the following recommendations for the country’s health system:

  • The public system should be the primary provider of healthcare as the service that can ensure equity and quality reaching rural and remote areas as well as urban areas.
  • The government needs to prepare a clear roadmap for increasing budgetary spending on healthcare to around 5% of GDP. Tax based funding and contribution from the formal sector should finance healthcare. This funding model should address regional health inequities by specific central transfers to the poorer states.
  • Regulation of the private sector must be a government priority. This includes establishing and implementing standard treatment protocols and ensuring quality of care.
  • The central and state governments should implement mechanisms to empower communities to hold the healthcare system accountable in order to ensure equity and quality of healthcare in the public and private sectors.
  • A comprehensive review of the current funding model including various government insurance schemes should be conducted with the aim of future consolidation for a national programme ensuring healthcare for all.

[1] according to the OECD the term refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ’disappear’ for tax purposes or to shift profits to locations where there is little or no real activity but the taxes are low, resulting in little or no overall corporate tax being paid.

[2] Still, 60% of all people from the bottom 20% were getting hospitalised in the public sector in 2004.

[3] The Planning Commission was an institution in the Government of India which formulated India’s Five-Year Plans, among other functions.



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