This discussion theme is in continuance to our first discussion titled ‘Health System in India: Bridging the Gap between Potential and Performance’. To review what others have commented on this subject earlier in the first discussion, visit our Blog.

How can we maximize health returns using available financial resources as a tool for efficiency?

1. Issues

1.1. There is fragmentation in spending due to multiple schemes and vertical programmes implemented independent of each other, leading to duplication and redundancies.

1.2. Low priority is accorded to primary care in State health budgets while evidence shows that increased investments in primary care yield better value for money than investments in higher levels of care.

1.3. The “fee for service” mode of payment for service providers in current private insurance schemes leads to unnecessary treatments, thereby escalating cost.

1.4. Current insurance schemes involve high transaction costs due to insurance intermediaries.

1.5. There is an inability to control provider induced demand in current insurance schemes.

1.6. The lack of coverage for out- patient care in current insurance schemes leads to fragmentation of care, pushing up care towards secondary and tertiary levels.

1.7. Allocations of funds to States under the National Health Mission (NHM) is based on population, area and special category States rather than health outcome indicators or health lag.

1.8. Some States do not contribute their stipulated share for Centrally Sponsored Schemes such as the National Health Mission.

2. Suggestions

2.1. There is a need for horizontal integration and creating a single pool of resources for service delivery so that districts may plan and implement effectively an agreed Essential Health Package according to need.

2.2. States require to prioritize strengthening of Primary Health Care in their health budgets.

2.3. Moving towards Diagnosis Related Group (DRG) mode of provider payments in insurance schemes may be considered using pre-fixed package rates as it incentivizes providers to reduce costs and take greater responsibility.

2.4. The formula for allocation of NHM resources to States may include outcome criteria such as Infant Mortality Rate, Maternal Mortality Ratio, anaemia and malnutrition.

2.5. States need to increase their share in Centrally Sponsored Schemes such as the National Health Mission consequent to Union Budget 2015-16 allocations.