Cost of Healthcare

Drawing from the 60th and 68th rounds of National Sample Survey Office, this study evaluates the impact of different (social, commercial and target-oriented) health insurance schemes on access to healthcare use, and cost of care and financing of medical expenses. The results show that though these schemes promote access to healthcare, they also increase the costs manifold. The commercial insurers have not been effective at pooling financial risks and seem to be indulging in maximising individual gain. Given the intrinsic market-failure and information asymmetry between the principal and the agents and difficulties in regulating the insurance-base system, this study advocates financing healthcare through a tax-based system which can be cost-effective for achieving universal healthcare access in India.

The key to improving the quality of healthcare services in India and reducing costs at the same time can be found by enacting legislation which lays down minimum standards of patient care. In the absence of such standards and the reluctance of health insurance companies to standardise either price or quality, healthcare services continue to be expensive and of doubtful quality. Developing standards of patient care by legislative mandate and a change in the attitude of health insurers can change the equation in favour of the patient who is now at the mercy of the hospital.