Improvements in Health Essential for Economic Growth - Example

Sur Supervisor Healthcare Systems in India World Health Organization (WHO) defines health as "astate of complete physical, mental and social well being and not merely the absence of disease or infirmity” (World Health Organization, 1). India spends 4.2 percent of its GDP on its healthcare sector. Surprisingly, only 5% of Indian population has medical insurance policies. On per capita income, India occupies much inferior ranking in the world. Though it is a country of 1250 million yet its contribution in world economy is dismal. Primary healthcare is lagging behind compared to many other countries as the government spends less than one-third of total healthcare budget on this sector. The paper attempts to study how good health of people is a prerequisite for economic growth. The paper also delves into understanding the role of health economics in eliminating extreme poverty, raising per capita income and spearheading economic growth of the country. Significance of Health Economics The significance of Health Economics is immense in the sense that it attempts to understand the demand for healthcare services, distribution of resources to meet those demands, the rate of growth of demand in healthcare services, existing gaps between the demand and supply statistics and so on. While resources are scarce, the demand for healthcare services is always on rise. Moreover, the demand for healthcare is associated with the economic state of people and their awareness on health issues at large. While humans are considered an asset to the nation, good health of people helps enhance the value of this asset. In this sense, healthcare services also help build up human capital of the nation. Improvements in Health Essential for Economic Growth Ill health restricts economic development and prevents poverty reduction to a large extent. Ill health and poverty both are tightly linked, or in other words, ill healths contribution to impoverishment is quite high. Poor people when become sick lose on two fronts: firstly, they lose their scant resources to get treatment and secondly, they lose their regular earnings until they get fit to work again. They usually fail to come out from this vicious cycle of ill health and poverty. For the same reason, their children also suffer in poverty and ill health. Often, they fail to go to school regularly and earn some meaningful qualification, which is necessary to get a good job in future. Generation after generation, thus, poor people fail to make any progress economically. If the establishment wants such large section of people to come out of this vicious cycle and contribute to the national economy then the government must intervene in this process. Furthermore, communicable diseases such as tuberculosis, leprosy, are prevalent most in the lower income group because of the unhygienic environments they live in. When a large section of population live below poverty line, it is obvious that their health conditions will be precarious. They will never be able to contribute to national economy significantly. When they remain untreated for a long time, they will be instrumental in spreading contagious disease to others making them sick and increasing economic burden of the country. In view of this, it becomes essential for governments to take a proactive role and treat everyone free of cost as far as possible, especially when they suffer from communicable disease. This will immensely help to enhancing productivity of the entire poor class and thereby of national economy. Understanding Disease Burden Being a low-income country and due to lack of clean water, malnutrition, and inadequate sanitation facilities, India bears a huge burden of water-borne and air-borne diseases such as diarrhea, lung disease, cancers. Disease burden in India can be categorized into three heads: non-communicable, communicable and other diseases that do not fall in any of the two categories. Together they all account for over 80 percent of the disease burden. Although non-communicable diseases like diabetes, cancers, cardiovascular diseases and the like are steadily increasing mainly due to changing lifestyle; it is the communicable diseases that pose a major threat to the economy. Communicable diseases such as malaria, cholera, typhoid, hepatitis, diarrheal diseases, tuberculosis, dengue fever, filaria, leprosy, chikungunya play a crucial role in causing adverse socio-economic impact (Annual Report to the People on Health). Rural and poor urban localities are greatly affected with communicable disease and malnutrition. Impact of non-communicable disease in rural areas is relatively less. Communicable Diseases - Challenges and Policy Response It is extremely essential to control communicable diseases for improving health of the poor people and thereby economy of the country. That is only possible by addressing numerous public health challenges. Healthcare infrastructure needs to be strengthened; availability of public healthcare workers per one hundred thousand of population needs to be enhanced. Primary healthcare needs to be provided to all, imparting distinct focus to urban slum population across the nation. Disease surveillance and response system needs to be strengthened. Public health laboratories need to be equipped with state-of-the-art modern equipments. Use of information technology must be incorporated at each level for better dissemination of information among healthcare workers and disease control. Pubic private partnership can increase effectiveness in controlling communicable disease and they must be encouraged. Fund allocation needs to be increased significantly to address above challenges keeping in mind nations demographic changes (Annual Report to the People on Health). Urban poor and rural people are less affected with non-communicable disease due to the fact that lifestyle causes are more responsible in causing such diseases. Its impact on national economy, however, cannot be undermined but upper middle and rich class of society who are in grip of mostly non-communicable disease usually can spend from their own pockets for treatment. In such circumstances, the government needs to focus more on poor to get them free of communicable disease along with running tobacco control programs. The National Tobacco Control Program (NTCP) is one such program that aims at spreading awareness towards harmful effects of tobacco chewing that is prevalent among all classes of society. Good health of people has several benefits to boost the nations economy. Some of them can be summarized as per the following. 1. Better Utilization of Natural Resources It is a fact that prevention is better than cure as it needs lesser resources than usually required to spend on treatment of disease. For example, providing safe drinking water to all eliminates or reduces incidents of water-borne diseases drastically. Thus, treatment costs associated with treating diarrhea, typhoid or cholera is saved to a large extent. Money saved in treatment can be diverted to other essential health related programs and creating infrastructure that helps improve employment and incomes of people year after year. 2. Healthy People means Improved Productivity The healthier workforce takes less leaves increasing their working days in a year. This results into higher productivity, increased disposable income and the higher spending for self and family. Link between poverty and ill health is robust. Concerted efforts made to improve good health for all helps reduce poverty ratio in percentage and in absolute terms too. 3. Health Expenditure and its Multiplier Effect on Income Generation Frequent illnesses due to unsafe water and improper sanitation prevent healthy mental and physical growth of child. This subsequently leads to reduced enrolment in schools, or higher dropout rates. Poor sanitation facilities results into non-enrollment or early dropouts for girls when they enter puberty. Steps taken to improve general heath that include providing safe water and adequate sanitation can have multiplier effect in creating enhanced GDP growth rates in the country. Public Health and Investment in India A report from the Associated Chambers of Commerce and Industry (ASSOCHAM) indicates that several economic and demographic factors will bring about significant changes in healthcare spending in India. Currently, the Indian Healthcare Industry is estimated at USD 40 billion. It is likely to grow to USD 280 billion by 2020. Some of the major factors such as demographic, economic, lifestyle changes are likely to provide a new direction to healthcare economics in the years to come. Demographic Factors Due to rise in average age, numbers of old age people above age 60 are on rise and it is estimated that this population will increase from 96 million at current levels to almost 168 million by 2026. This will provide a huge boost to healthcare activities increasing its contribution to national GDP. Rising literacy, growing awareness and patient preferences is likely to make significant differences in the health economics of India (ASSOCHAM, 2011). Economic Factors Government incentives providing tax exemption for 5 years to build hospitals in rural areas along with higher depreciation on equipment is likely to boost healthcare activities and spending in rural area. Increased awareness among rural population will also increase health related spending in the years to come (ASSOCHAM, 2011). Medical Tourism Due to relatively low treatment cost and hospitalization cost in India, medical tourism is fast opening up in India; it has begun to be recognized as a source of significant export earnings. Medical costs in India are much lower when compared with the costs that prevail in some of the developed economies. In a country like the UK where waitlist is long for certain kinds of operations, people prefer to visit to some Asian destinations such as India where treatment can be availed immediately at affordable costs. Moreover, the patients can also visit the places of tourist interests after recovery (ASSOCHAM, 2011). Lifestyle Changes Changing lifestyle and increased urbanization will increase the incidents of obesity, diabetes, heart ailments, and cancers resulting into enhanced healthcare spending. Eventually, it will lead to more investment in infrastructure and healthcare related facilities; thus, contributing to increased economic activities in India (ASSOCHAM, 2011). Medical Insurance Business With liberalization and changes in economic policies in the last two decades, India has opened up its medical insurance sector for private players with restricted foreign equity participation. With rising income levels of the middle class and their numbers, insurance business is bound to increase manifolds (ASSOCHAM, 2011). Public Health Expenditure and Impact on Health Ravi Duggal asserts that though health outcomes depend upon poverty but the important aspect is public health investment that can eliminate poverty. It means increase in health expenditure will finally result into enhanced GDP of the nation. According to the World Bank, "A 10% increase in public health expenditures as a proportion of the Gross Domestic Product (GDP) would be associated with a 7% decrease in the maternal mortality rate, a 0.69% decrease in child mortality rate, and a 4.14% decrease in low weight for children under five years of age" (World Bank, 8). It means public health expenditure is likely to result into better health outcomes. It has also been revealed that out of total health expenditure in the country, almost 71 percent is spent by households with almost 20 percent coming from the central government. State governments spend only 2 percent and balance coming from private entities other than households (Annual Report to the People on Health). The National Health Policy, 2002 – Increase in Health Expenditure The National Health Policy, 2002 aimed at ensuring healthcare services across the length and breadth of the country. Major emphasis was given on creating effective primary healthcare services in rural areas. Some of the important features of this health policy are: 1. Health expenditures will be increased to 6 percent of GDP with central government contributing to 25 percent from the existing 15 percent, balance will come from states. Central government will allocate 55 percent of the total public health investment towards creating primary health sector. 2. Responsibility of implementation will rest on autonomous bodies at State and District levels. State Health Departments will restrict themselves to the overall monitoring and managing only technical aspects. 3. The policy also emphasizes on skill improvement for healthcare workers. It is made mandatory for the fresh graduating doctors to serve at some rural destination for at least 2 years. 4. The Health Policy proposes a health insurance scheme by the government involving private sector for providing needed treatment. However, the same will be implemented only at selective centers to assess outcomes of such arrangements. 5. Medical tourism will be given the status of deemed exports as is available to all services and goods exporters provided payment is received in foreign exchange. 6. The health policy also envisages establishing an integrated disease control system making use of information technology right from the lowest level of public health department to the central office in government so that timely action can be taken. The most discerning point in this health policy is higher allocation – up to 6 percent of GDP towards healthcare expenditures with central government contributing to 25 percent from the 15 percent earmarked in previous health policy. Income Elasticity of Demand for Healthcare Elasticity is an important concept in economics; elasticity of healthcare demand and expenditure is crucial for understanding the health economics of India for policy making purposes. Elasticity is defined as the change in demand or supply in response to the change in its price. High income elasticity means that with the rise in income, consumers will spend more on a particular commodity or service. Getzen asserts that the elasticity of demand for healthcare expenditure is directly proportional to the level of income. Also, it is a fact that the income levels of people of India are steadily going up with GDP growth rate is hovering over 5% for last couple of years. Income Elasticity and Health Insurance Marquis and Long argue that demand for health insurance has not gone through any significant change. According to the researchers, income elasticity in developing countries is low and estimated in the range of 0.03-0.04. This means that financial burden on masses can be reduced by emphasizing on the need to buy health insurance. The government must insure every individual regardless of their income levels so that better and improved health opportunities can be achieved for all. Innovative Model to Pay for Healthcare Costs Healthcare is becoming expensive in most parts of the world and healthcare funding is done through medical insurance coverage. Treatment cost towards non-communicable disease is pretty high for an individual when confronted with. In India, only a small proportion of the population can afford any major treatment expenditure related to heart, kidney, brain or similar ailments. Innovation could be a boon for those who are uninsured. Some low-cost model is needed to get relieved millions from the health burden that they cannot afford. The Narayana Hrudayalaya Hospital group in India has developed the concept of micro-health insurance called ‘Yeshasvini’. The hospital group charges a premium of 11 cents a month from low-earning farmers and rural folks. The scheme pays only for surgical procedures. Such 400 hospitals are in operation in the state of Karnataka alone in India. Some other states such as Tamilnadu and Andhra Pradesh too have now launched similar schemes. The scheme is boon for those who work in an unorganized sector. Devi Shetty, the founder and chairperson of the Narayana Hrudayalaya Hospital group, argues that such small premium can be collected conveniently via mobile phone operators and electricity bills for the convenience of subscribers. Devi Shetty claims, “We will become the first country in the world to dissociate health care from affluence” (The Economist). There is no doubt that such micro-insurance models can make difference and put the country’s economy on the higher trajectories of growth. Use of Pharmacoeconomics (PE) in Indian Context According to Subhash Mandal, Pharmacoeconomics is a sub-branch of health economics. It involves studying the cost of drugs, services and its effects in terms of enhanced quality of life or in terms of monetary value. Thus, the process involves doing cost-benefit, cost-minimization, cost-utility or cost-effectiveness analysis. Such studies may help to do optimal healthcare resource allocation scientifically. Pharmaeconomics as a Price Regulating Mechanism Pharmaeconomics can serve as an effective tool in framing a pricing policy of important drugs. The National Pharmaceutical Pricing Authority (NPPA) in India ensures the price of the scheduled and non-scheduled drugs by taking into consideration different mechanisms. The authority monitors price movement of these drugs and fixes price to consumers based on the cost of production and other factors that include scrutiny of price lists and analyzing retail store audit reports. NPPA may also request producers to submit related Pharmacoeconomics data in reference to its efficacy and cost of production. Universities can also be directed to conduct pharmacoeconomic studies to find health outcomes. Thus, the government can undertake the regulation of drugs and services based on pharmacoeconomic studies and optimize the health expenses of the nation (Mandal). Pharmacoeconomics for Designing Appropriate Insurance Scheme Pharmacoeconomics can also play an important role in designing a centralized insurance scheme. The government of India launched a Rashtriya Swasthya Bima Yojna (RSBY) in 2008 under which 26.8 million smart cards were provided covering 115 million people across India to get the benefit of health services. Pharmaeconomic study on these benefits can help widen the base and include many others in rural and urban India. Current insurance schemes that operate in India cover only a small proportion of population. Insurance companies can expand further after undertaking pharmacoeconomic evaluation across other socio-economic class of the society (Mandal). Pharmacoeconomics in R&D Activities PE study may help drug manufacturing companies too for investing in R&D activities or researching new drugs; it may help drug manufacturing companies to formulating business strategies. Thus, pharmacoeconomics can help significantly in forming healthcare guidelines, regulating prices, directing research and development, and formulating government policies so that entire cross-section of the population regardless of their socio-economic status is benefitted (Mandal). Conclusion Several inconsistencies and huge urban and rural divide can be noticed in Indian health sector. While certain urban locations such as Mumbai, New Delhi, Chennai, Bangalore house super specialty hospitals in the country where patients visit from some far off locations such as Africa, Middle east and Europe for availing excellent treatment, poor people from rural areas do not receive even basic primary healthcare facilities and medicines. Even adequate numbers of healthcare workers are not available to take care and treat them for their immediate needs. However, some of the governments initiatives have been remarkably successful, especially eradicating smallpox, polio, leprosy across the length and breadth of the country. Significant drop in Infant Mortality and the Total Fertility rate is also commendable. Unfortunately, the morbidity and mortality rates across the country are still very high restricting economy to go full steam. As far as initiatives to preventing and controlling of communicable diseases are concerned, India needs to put in more concerted efforts. Perhaps, providing safe drinking water and sanitation facilities to all urban and rural centers can play a pivotal role to reducing incidents of communicable diseases. For this, the government needs to increase budgetary allocation towards providing safe piped water and sanitation facilities to all to keep rural and urban poor free of communicable disease so that their contribution to the national economy could increase manifold. Works-Cited Annual Report to the People on Health. Ministry of Health and Family Welfare: Government of India. Web. 2011. 17 November 2014. http://mohfw.nic.in/WriteReadData/l892s/6960144509Annual%20Report%20to%20the%20People%20on%20Health.pdf ASSOCHAM (2011). Emerging Trends in Healthcare. Web. 17 November 2014. http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/Emrging_trends_in_healthcare.pdf The Economist. India can show the way on health. Web. 17 November 2014. http://www.economist.com/news/21566425-innovative-thinking-can-bring-health-care-uninsured-billions-argues-devi-shetty-founder-and Getzen, Te. ‘Healthcare is an Individual Necessity and a National Luxury: Applying Multilevel Decision Models to the Analysis of Healthcare Expenditures’. Journal of Health Economics. 19(2): 2000. 259-270. Mandal, Subhash. Pharmacoeconomics- Regulatory perspective and its relevance in Indian Context. Pharma Times. 45(5). Web. 17 November 2014 [Also available at] http://www.ispor.org/consortiums/asia/documents/Pharmacoeconomics_Regulatory%20perspectives.pdf Marquis MS and SH Long. Worker Demand for Health Insurance in the Non-Group Market. Journal of Health Economics. 1995. 14(1). 47-63 Ravi Duggal. ‘Poverty and Health, Criticality of Public Financing’, Indian Journal of Medical Research, 2007. 126 (4), 239-408 World Bank. Investing in Health for Economic Development. Web. 17 November 2014. http://www.who.int/macrohealth/action/sintesis15novingles.pdf World Health Organization. Constitution of the World Health Organization. Web. 17 November 2014. http://www.who.int/governance/eb/who_constitution_en.pdf Read More