2. A look at Healthcare in India
Our Goals and Challenges
Improve Access
Reduce cost of creation
Increase Trained manpower
Healthcare- Opportunity
Summary
3. Healthcare, an important economic
enterprise in developed countries
Fact #1
Most developed countries and developing countries spend almost 15% of
the GDP on Healthcare and this sector is among the largest employers.
The healthcare sector in India employs over 4 million people, one of the
largest employers
Fact # 2
Healthcare coverage is almost 100% in many of the developed countries
Fact # 3
Access to healthcare improves the efficiency of the work force and
significantly contributes to economic growth
4. Healthcare, an important economic
enterprise in developed countries
Fact # 4
Healthcare sector need between now and the year 2020 is between Rs
150,000 crore to Rs 175,000 crore (%s 1,500-1,750 billion) to reach bed
capacity as per WHO norms
Fact # 5
In Health „PREVENTION ' is always better than `CURE‟
5. Indian Healthcare - At Crossroads
Large gains in healthcare status. Remarkable improvements in mortality
and fertility rates
However
Hospitalization frequently means financial catastrophe
Only 10 percent of Indians have some form of insurance,
Hospitalized Indians spent more than half (58%) of their total annual
expenditures on health care
More than 40 percent of those hospitalized borrow money or sell assets to
cover expenses
Current infrastructure grossly inadequate
India has 1.5 beds per thousand people, compared to 4.3 beds per
thousand people, in middle-income countries.
6. Healthcare Infrastructure in India
STATUS: Underdeveloped in comparison to other countries
Beds Physicians Nurses
Per ’000 population Per ’000 population Per ’000 population
0.5*
India 1.5 1.2** 0.9
Other low income countries
(e.g., sub-Saharan Africa) 1.5 1.0 1.6
Middle income countries
(e.g., China, Brazil Thailand, 4.3 1.8 1.9
South Africa, Korea)
High income countries
(e.g., US, Western Europe, 7.4 1.8 7.5
Japan)
World average 3.3 1.5 3.3
*Registered allopathic physicians only
** Including registered Indian Systems of Medicine (ISM) physicians but excluding unregistered practitioners
Source:Asian Health Services; Indian Nursing Council; World Development Indicators; World Bank; McKinsey analysis
7. Key Health indicators
Though there has been significant India has a long way to go to meet
improvement… world standards
Life expectancy at birth
Years
78
63 65
Life 37
expectancy
Developing Developed
India 1951 India today
country average country average
Infant mortality
De aths pe r '000 bir ths 56
Infant mortality 146
70
6
Developing Developed
India 1951 India today
country average country average
DALYs*
Pe r '000 population 256
339 119
Morbidity 274
Developing Developed
country average country average
India 1990 India today
*Disability adjusted life years
Source: Global Burden of Disease, WHO 1996, World Bank Report, 2001
8. CENTRAL GOVERNMENT EXPENDITURE ON HEALTH DECLINING
Issues In Current Healthcare Delivery System
% Plan Expenditure (Actuals)
3.5
3.3
3.1
2.9
2.7
2.5
2.3
2.1
1.9
1.7
1.5
First Second Third Fourth Fifth Sixth Seventh Eighth
Five Year Plans
Contrary to popular perception, the role of the government in this sector has been continually shrinking during the last 20
years and the private sector now accounts for over 68 per cent of total spending in this industry.
Where does the money come from Now?
9. Improvement in health can impact
long-term economic growth through multiple channels
Healthcare
outcomes Impact on macroeconomic drivers of growth
Consumption
Lower Reduced absenteeism
Human capital
prevalence of Increase in individual income
diseases Increase in productivity
Increase in education levels
Investment
Improvement
in healthcare Economic
system Greater share of growth
population at working
age
Decrease in
infant Human capital
mortality rate
Increase in individual income
Consumption
Increase in due to greater number of
working years
life
expectancy Increase in share of Investment
population with high savings
rate
Parents do not need any more to have many children just to assure themselves that at least one of them will survive till the parents’ old age
Source: Macroeconomics and Health, WHO 2001
10. The Healthcare Delivery Sector
Plays An Important Role In The Economy Today
Sector Direct employment Revenues/GDP
Million, 2000-2001 Per cent, 2000-2001
Healthcare 4.0 5.2
Education
5.3 4.8
Retail banking Healthcare is the largest
1.0 3.5
service industry in
Power 1.2 3.0 terms of revenues and
Railways
the second largest after
1.6 1.8
education in terms of
Telecom 0.8 1.4 employment
Hotels, restaurants
1.7 0.9
IT
0.4 1.7
Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
11. Our Goals
Create a robust healthcare model by
Improve access
Reduce Cost of Creation
Increase trained manpower
12. Goals and Key Challenges
Goal Elements Key Challenges
• Address all income segments with wider care options
Improve Access • Development of new models
• Telemedicine
Reduce cost • Government to play a larger role
of creation • Low paying capacity of addressable population
• High cost of inputs (e.g. medical equip., drugs )
Increase • Professional expertise & training
trained • Technology, newer tools, clinical research, telemedicine
manpower
14. Less than 15% of the Indian population is formally
covered through prepayment
~5 ~14
~5
Additionally,
government
provides
3.4 coverage
through free
0.4 access to its
facilities
Type of Private health Social Employer’s Community Total
coverage Insurance Insurance spend Insurance
(ESIS)
•Premium paid •Mandated •Reimburse •Schemes
through wage-based ment or free managed by a
employer’s contribution access to local provider,
Description health plan or from employer NGO or a
directly by employees facilities welfare body
individual and
employers
15. Each type of prepayment faces issues of either reach or
quality
Type of coverage Key issues
Private health •Growth of private health insurance constrained by regulatory and
insurance systemic barriers
Social •Insufficient utilization of healthcare funds
insurance •Poor quality of care at ESIS facilities
Employer‟s •Healthcare is not part of employer’s core business, but employer’s
spend cover is necessary in absence of effective insurance schemes
Community •No large-scale development of community schemes across the country
insurance
•The scale of government spending is low compared to other developing
Government‟s countries
spend
•The expenditure is inequitable as the spend mostly benefits the richer
segments of the population
16. The low levels of activity in health insurance can be
attributed to regulatory and systemic barriers
Barriers Key issues* Implication
40% equity cap •Difficult to find a local partner in a less
on MNC understood, risky business
participation
Regulatory Solution : Increase FDI limit to 49%
High capex •High premia needed to compensate for Investment
requirement of Solution : Decrease capital requirement to
Rs.50crore
Rs. 100 crore
Systematic barriers No habit of •Higher marketing costs to educate customers
prepayment about insurance
1. Customer attitude High levels of •Claims ratio will be higher for existing products
fraud Solution : Co-Payments to be made mandatory
2. Competitive •Mediclaim products priced at a low level
scenario Low premia
•No standardization of treatment protocols and
3. Provider Providers not quality, either through registration or accreditation
unpreparedness standardised •Huge base of small practices limits rapid
networking
•Easier for providers to perpetrate fraud
Solution : Make accreditation mandatory for
4. Payer providers wishes to be part of network
unpreparedness •Unable to design schemes that are profitable
No habit of Solution : Make healthcare insurance mandatory in
prepayment organized sector
Source: McKinsey analysis
17. Challenges in Social insurance
Challenges Key issues Solution
Poor State Contract private hospitals at negotiated rates
Infrastructure Workers shall be free to choose contracted
providers
Role conflict:
Payer as well Poor quality in Privatise existing ESI hospitals
as Provider ESI hospitals
Build Super speciality hospitals and hand them
with low over to operators
occupancy
Case Study 1: Thailand
Government introduced compulsory social health insurance for all employees of companies with
more than 10 employees.
Scheme funded equally by employer, employee and government
Result
Provider network increased substantially
Patients at lower cost availed better quality care
Source: McKinsey analysis
18. In Thailand, social insurance acts only as payer and
contracts with public and private providers on a
capitation basis
Impact on providers
Creation of Social Security Scheme (SSS)
•The scheme has stimulated the
•Government introduced a compulsory social health development of network of providers
in insurance scheme following the enhancement of who are sub-contracted to provide
regulation in 1990 service
•All employees of companies with a workforce of 10 •Private hospitals have responded
or more are entitled to hospital and ambulatory care more rapidly than public ones, and
under a scheme funded equally by contributions from increased their share of the market
employees, employers and government from 17% to 55% between 1991 and
1998
•Eligible public and private hospitals, that is those
who meet specified standards, can register to •SSS patients have both lower costs
become “contractors” and shorter stays than other types of
patients at both public and private
•Workers are free to choose where to obtain care hospitals
from among contracted hospitals
Source: Mills, 2000; McKinsey analysis
19. To Increase Efficiency And Effectiveness,
Government Should Split Its Roles
As Payer And Provider
Objectives From… …To
Network of public High autonomy of
facilities managed management (finance,
by health human resources, etc.)
departments
Mix of public and private Splitting the payor and
Increase Limited decision- providers who respond
efficiency of making at local better to patients' needs provider roles creates a
level and preferences
delivery contract between those
No link with private
providers who
dominate
responsible for achieving
healthcare
delivery today
health goals (payor) and
those responsible for
Public spending Public spending focused on delivering care in a cost-
allocated mainly public health objectives
to curative and the poor effective and high-quality
medicine, utilised
Increase mostly by the rich
Funds managed at local level manner (provider)
through contracts with
effectiveness Funds managed by providers (public and
of public central/state private)
spending government
through
budgetary
allocation
Source: McKinsey analysis
20. Korea has been able to extend social insurance to the
whole population
Health identified as priority area by government
1970s - one of the “four basic necessities of life”
-Key element of labour force productivity
Medical Insurance law
1976 -Compulsory in insurance for employees in firms
with more than 500 people Coverage
-Voluntary community-based insurance for others increased
from 14% of
1977 Medical Assistance Programme for poor the population
in the mid-
1979-83 Compulsory insurance progressively extended to 1970s to 100%
all organised sector (firms with more than 16 in the
people) beginning of
the 1990s
Experimentation of compulsory insurance for
1982 certain self-employed groups, e.g., farmers, taxi
drivers.
1988 Social insurance compulsory for everyone
Source: Ministry of Health: World Bank report; Bhat (1999); McKinsey analysis
21. The local nature of community insurance makes it well
equipped to cover the informal sector
Design, collection and Administration of
Provision of care
pooling scheme
• Affordable premium •Collection mechanism •Local hospital is normally the
• Only most required designed to suit needs of provider
treatments are covered community •Local hospital may be
How • Collection is through •Scheme is administered by incentivised to control costs •Schemes
local body and peer a local representative
community provide
pressure ensures regular •Low administration costs
schemes payment (5-8%)
tangible
work •Fraud is lower due to peer benefits for the
pressure community
•Less
vulnerability to
health related
poverty
•Localised administration to •Involvement of local •Lower costs of
•Community
representatives involved control fraud levels provider so that fraud is healthcare
under control
in design •Lean administration to keep
Key
•Scheme should cover overhead costs low
Success critical needs of the
Factors community
Source: McKinsey analysis
22. Government role in healthcare is critical in India
Role Rationale Importance in India
•“Public health is a public good”
Finance and everybody benefits from it but 44% of DALYs are
provider for nobody is individually ready to pay caused by
public health communicable
•Government is best positioned to diseases which are
finance (though tax) and conduct impacted by the
public health programmes (through state of public
primary care network) health
•Health recognised as a basic human
Subsidise right, however poorest segments
poorest have limited purchasing power
segments 35% of Indians
•Government equipped to redistribute below poverty
wealth on a large scale through line
taxation and budget allocations
Source: Global burden of disease. WHO 1996: World Development Report, 2001: McKinsey analysis
24. Case # 1:Aragonda Hospital
Self sustaining model – Each family pays Rs. 1 per day –
covers medical treatment upto Rs. 20,000
“Affordable
health care for
all”
25. Case # 2: Arogya Bhaghya Yogane Scheme
A self funded scheme, launched in 2001 for
the Karnataka Police Force covering more
than 300,000 employees and their
dependents for a monthly contribution
(deducted from salary) of Rs.105/- per
employee
BENEFITS
•Coverage for all secondary and tertiary
admissions
•Coverage upto Rs.100,000/- per family
•Cashless treatment at network hospitals
•Reimbursement in case of admissions in
non-networked hospitals
26. Case # 3: Yeshasvini
A self funded scheme, launched in 2003 for
the Karnataka farmers covering more than
17 lakh farmers for an annual contribution
of Rs.120/- per farmer
BENEFITS
•Free OP service
•Coverage upto Rs.100,000/- per procedure
•Cashless treatment at network hospitals
•Reimbursement in case of admissions in
non-networked hospitals
27. Case # 4: SEWA Insurance
For women workers of the informal economy who have no fixed
employee-employer relationships and depend on their own
labour for survival.
Mainly 4 types of women workers
•Hawkers and Vendors
•Home based workers like weavers, beedi
workers etc
•Manual labours
•Small producers
SEWA Health Team provides a wide range or primary health
care services, but the main thrust is to provide simple, life-
saving health information with a focus on disease prevention and
promotion of well-being
28. Case # 4: SEWA Insurance-Scheme details
Member
Scheme I II III
Annual Premium Rs. 85 Rs. 200 Rs. 400
Fixed Premium Rs. 1000 Rs. 2400 Rs. 4800
Sickness Rs. 2000 Rs. 5500 Rs. 10000
Asset Loss Rs. 10000 Rs. 20000 Rs. 40000
Natural Death Rs. 3000 Rs. 20000 Rs. 20000
Member's
Accidental Death Rs. 40000 Rs. 65000 Rs. 65000
Husband's
Accidental Death Rs. 15000 Rs. 15000 Rs. 15000
29. Challenges in managing growth of community insurance
schemes
Challenge Solution
• Accelerating growth of community • Educate a large mass of people on the need for health
schemes insurance thorough mass communication media
•Develop different models and advise the local
body/subscribers to choose few
•Subsidy from Government
•Addressing local requirements •Involve State Governments to provide part of subsidy to
cover diseases and treatments most required by
community
•Mitigating risk for smaller pools •To ensure that risk of having a large number of smaller
of community insurance pools is managed, reinsure or underwrite risk thro’
especially in the absence of National Insurance agencies or seek assistance from
reserve pool Worldbank
Source: McKinsey analysis
30. Recommendations to seed the growth of community
insurance
Short term: Seed growth Long term: Formalise growth
•Launch pilots in 2-3 states •Provide funds for community schemes
-Test 2-3 different designs in varying -Building a contingency fund
conditions -Direct subsidy to some schemes
-Survey and monitor all existing
community schemes
•Develop national guidelines for •Leverage existing health workers
community schemes (e.g., allowing (government or private) to roll out
providers to start community schemes schemes across states
without a large capital requirement)
32. Challenges in attracting investments
Challenges Key issues Solution
Concessions from Government
Investments in Investments Infrastructure status for healthcare
semi-urban become industry
and rural areas unviable
abysmally low Concessional allotment of land in
semi-urban and rural areas (Example:
Srilanka, Malaysia)
Contribution from Government for Self-
Funded Schemes
(Example : Thailand, Korea)
Tax Benefit for contributions
Reduce Customs Duty on equipment to
Zero level
(Example : Malaysia, Srilanka)
Encourage Public Private partnerships
Source: McKinsey analysis
33. Public-private Partnerships in Healthcare - Examples
Models Options Successful examples
Contract out non-clinical hospital Karnataka: Cleaning, maintenance and waste
services (e.g. catering, laundry) management contracted out in 82 hospitals
Contract out
Contract out clinical hospital services Tamil Nadu: High technology services in major
services teaching hospitals contracted out
(e.g. radiology, pathology)
Romania: Output based contracts with private GPs
Contract out primary care delivery
Tamil Nadu: Management of PHCs by corporate
houses with large presence in the area
Private Private management of primary
Gujarat: PHCs in one district managed by SEWA
management facilities
of public Brazil/ South Africa: Management of public hospitals
facilities Private management of public by private providers with compulsory treatment
hospitals for patients funded by the government at a
negotiated price
Private Build-Transfer-Operate (BTO) or UK: 105 projects as part of the Private Finance
Initiative (PFI) attracted private investment of GBP
investment to Build-Operate-Transfer (BOT) 2.5 billion
meet public
Build-Own-Operate (BOO) Australia: 15 hospitals built & operated by private
demand
sector
Conversion US: 300 public hospitals (1/5th of total) converted to
from public to Conversion to private, non--profit private (mostly non-profit) between 1985 and 1995
private
Conversion to private, for-profit Sweden: 20% of Stockholm county's public hospitals
ownership privatized between 1994 & 2002
Source: World Bank Report; Bhat, 1999; Public Hospitals, World Bank note 2002; House of Commons, 2001; Kaiser Foundation, 1999
34. Focus Public Provision on
Rural Primary Care (Korea, Thailand)
Initiative: greater involvement of private Impact: Enabled government to
sector in urban secondary/ tertiary care focus on rural primary care
Hospitals traditionally for-profit private Government traditionally operated a rural
institutions, concentrate in urban areas network of primary health posts, health
Korea This concentration was increased through centers and maternity centers
privatisation in the 1980s: Government was able to strengthen rural
- 34 city and local government hospitals care by investing in
transformed into private
- Korea Health Development Institute that
- Share of public hospitals in urban beds designed affordable community services for
decreased from 14 to 5 percent rural population
Government ownership remained for - New types of health personnel: community
health practitioners, village health agents, etc.
specialized institutions only: e.g.,
tuberculosis, psychiatric hospitals
Government health spending sustained at high
Government created incentives to attract levels: many new health centers constructed
investment in the health sector between 1977 and 1986
Thailand In addition, Health Ministry did not to Focus on manpower: intensification of training, 3-
invest in additional urban health year compulsory medical service, part-time
facilities, leaving the field open to the private practice permitted, deployment of village
private sector health volunteers, etc.
Later this decision was extended to As a result, Infant Mortality Rate in rural
cover hospitals in rural areas Thailand fell from 55 in 1975 to 30 in 1990
Source: Yang, 2001; Health Insurance in Developing Countries, ILO 1990; World Bank discussion paper, 1996
36. CHALLENGE : Increase Qualified Practitioners In
Rural Areas
To meet this challenge,
some states have created incentives
to attract physicians in rural areas
Examples States
Monthly incentive allowance of
Andhra Pradesh
Rs. 1,500 as part of “Tribal Health
Monetary Service"
incentives Contracts with private practitioners to fill
Kerala
chronic vacancies in government rural
facilities
Mandatory rural service for doctors who
Maharashtra, Orissa and
Non- qualify for PG courses (need to serve in
Karnataka
rural area before start of course)
monetary
incentives Reservation of select PG seats for in-
Kerala
service rural doctors
37. Healthcare - Significant contributor in
employment generation
Employment in healthcare Revenues as a per cent of GDP
Million Per cent
6.5-7.0 +~33% 6.2-7.5
+~66%
5.2
In addition, Healthcare can
through account for
4.0 indirect 7% to 11% of
employment, incremental
healthcare GDP growth
sector could from 2001 to
create 2-3 2012
million jobs
2001 2012 2001 2012
Source: McKinsey analysis
39. Healthcare – An opportunity
•A population of ~1.2 billion. Fastest emerging healthcare market.
•10 fold increase in healthcare requirements in next 10 years
•No of doctors to double, nurses triple and number of para-medical staff to increase by 5 times. To maintain
current nurse-doctor ratio, the number of students in nursing schools has to triple.
•Healthcare spending 6% of GDP compared to 12.4% of GDP in the USA. 60% healthcare expenditure is
privately funded
•The World Healthcare Market is around USD 2.8 tn if India earns even 1 % of this amount it will generate
revenues of USD 28 bn.
•Growth of the sector can increase its contribution even further to 6.5-7.2% of GDP and increase
employment by at least 2.5 million by 2012
•750,000 beds + investment of Rs.150,000crores needed in the next 10 years
•Government and international agencies will only be able to spend Rs.30,000crore over the next 10 years
on healthcare infrastructure
•Even if the number of medical students were to double, 25 per cent of non-allopathic practitioners will need
to be involved in delivering care
•Under the demand scenarios private investment required could touch Rs.100,000 to 160,000crore
40. Healthcare – An opportunity
Total number of workers in India - 397 million
Unorganised sector - 369 million
- Agriculture - 289 mn
- Non-Agriculture - 80 mn
Organised sector - 28 million
Mandatory insurance for organised sector and insurance targeting
women alone will improve insurance coverage to over 35% of
population - Short term
Universal coverage can be reached with mandated insurance in urban
areas and high public subsidies in rural areas - Long term
41. Healthcare – An opportunity
Coverage in million 1000 900
500
60 84 60
0
PHI SI ES CI
Present 4.8 41 60 60 Present
60 84 60 900
Potential
Potential
PHI- Private Health Insurance ES- Employer Spend
SI – Social Insurance CI- Communal Insurance
43. Summary
• Facilitate investment into healthcare sector by
According Infrastructure status
Increase FDI cap to 49% now and gradually
increase to 74% over a period of 5 years
Decrease customs duty levels to Nil in line with
countries such as Malaysia, Srilanka (under BOI)
• Improve access by
Decrease capital requirements to Rs.30-Rs.50
crore for Healthcare Insurance companies
Make co-payment mandatory to avoid fraudulent
practices
Encourage community insurance schemes and
make nominal subscriptions
44. Summary
Make health insurance mandatory for organised sector
Separate role of payer and provider in Social insurance
Privatise ESI hospitals
Promote Public Private Partnerships
• Define and ensure minimum quality standards
• Make accreditation mandatory for becoming part of network of
hospitals
• Improve standards & Numbers of medical education / for medical
and paramedicals
• Encourage and facilitate the integration of medical services and
information technology – Health Satellite / Health Network
46. Public & Private Participation
in Healthcare
Private Sector Benefits Public Sector Benefits
•Quality Healthcare •Widespread reach
•Standardised Practices •Easy Implementation &
•International Standards Enforcement
•Human Resource Welfare •Accessed by Masses
•Stopping Brain Drain •Cost Effective
•Management systems •Rural – City Networked
•PHCs to Tertiary Care Models
47. PPP Objectives in Healthcare
Make Health affordable and within reach
Provide Health technology like Telemedicine to cut geographical
and cost limitations
E-Learning
Implement Health standards
48. Focus areas of participation
Technology is the key enabler for development
Telemedicine made healthcare affordable
Insurance key driver in making health affordable
Staggered payments/ co-payments Vs one time costs
Qualified people required to run the show
Doctors/ IT/Nurses etc- Train and Empower
Healthcare is symbiotic with other industries
Create strong Telecom/ IT/ Road and Power sectors
Standardisation is key to simplification
Implement Health Information standards
49. Successful Public - Private Partnership
Models in India
•TeleMedicine – Private Health Provider with ISRO
•Indian School of Business – Private School on Govt Land
•Janmabhoomi – Govt initiative adopted by private organisations
•Involvement of DRDO in making Artificial Limbs
•House Financing Loans – Govt Subsidy
•Farmer‟s Credit Cards – Govt Subsidy for Farmers (UTI/ Andhra Bank)
50. Successful Healthcare Delivery- Key Enablers
Infrastructure creation at affordable cost
Accessibility
Affordability
State role is important in creating
successful healthcare delivery model
51. HURDLES IN RURAL HEALTHCARE
Infrastructure creation- Expensive; Even, if created, specialists not
willing to work in rural areas
Accessibility- Modern healthcare facility available only at 300-500 kms
away from their homes
Affordability- Poor earn their livelihood income on daily basis; Can’t
afford to reach far places to avail healthcare facility
Result: Medical facilities never reach rural populace
which constitutes 70% of population in India
52. OVERCOMING THE HURDLES…..
Set up low cost medical facility
which will cater to 70% of Insurer
illnesses
Establish Telemedicine
connectivity
Focus on lower socio-economic
groups
Community based social Hospitals Insured
insurance
Generation and implementation of
the unified delivery systems for
proper administration of the health
schemes
53. TAKEAWAYS 1/3
Influence Governments to provide fiscal incentives to
Healthcare sector
Encourage research projects
Fund training of manpower & create skilled manpower who
could be deployed across borders
Work with local banks and structure financial products to match
cashflows of the project
Fund clinical research projects which will subsidise upgradation
of technology
Explore the opportunity in traditional medicine in conjunction
with Allopathy
54. TAKEAWAYS 2/3
What Governments can do?
Create internationally competitive basic infrastructure facilities
Provide fiscal incentives to Healthcare sector
Establish broad bandwidth even at rural areas
Concessional lease options in hiring bandwidth
Work on low premium health insurance products
Define and ensure minimum quality standards
Fiscal assistance in training and empowering Human
resources
55. Not only does India have
the capacity and
capability to significantly
raise the standards of
healthcare, but to raise it
to levels which makes it
the global healthcare
destination
A Healthy India is a Wealthy India