As one of the recently industrialized nations, India has a fast-growing economy as well as an ever-expanding, ever-urbanized population, however its healthcare system still has a lot of potential for development. Lawton Robert Burns describes the issues with India’s health services, and addresses a variety of lenses and frameworks through which one can begin to analyze India’s developing healthcare system.
To Western readers, analyzing a healthcare system in the East seems daunting. It takes some of us decades to master an understanding of the healthcare system of our origin country. Nevertheless, there are several methods to approaching another country’s system. These include the exposition of some invariant principles that apply across various contexts, the application of existing frameworks for healthcare system analysis, appraisal of the major transitions underway in the country, and an analysis of the country’s public health issues.
Some Invariant Principles of Healthcare Systems
The Iron Triangle
One way to analyze a healthcare system is in terms of invariant principles across cultural contexts. One such principle is the “iron triangle” (Figure 1). The logic of this triangle is that there are inevitable societal tradeoffs in pursuing any of the goals (vertices) in the triangle. If the triangle is an equilateral triangle, with each angle 60°, policy initiatives that expand one angle beyond 60° force one, or both, of the other two angles to contract below 60°. Efforts to promote access to care will therefore lead to higher demand for care, rising utilization, and higher costs. Similarly, efforts to promote quality by virtue of enabling access to modern technologies will also likely raise costs. Determining the right thrust and mix among the three angles constitutes the balancing act in resource allocation faced by most countries.
India faces challenges in pursuing each of these goals. With regards to cost, at least 70% of all healthcare is frequently financed out-of-pocket by the population. There is little health insurance or other forms of risk pooling, little regulation and accountability of providers, and a predominance of fee-for-service payment, all of which are associated with high costs. There is also questionable efficiency of much of the state healthcare system, and a great distrust of the public sector.
With regards to quality, there is little regulation of providers, treatments, and medical products, considerable variation in the training and education of providers, and little enforcement of laws and regulations at state level. There is also evidence of poor health outcomes among the Indian population.
Regarding access, a substantial majority of the population dwells outside of where most healthcare facilities exist – in the cities. Access is particularly problematic for the poor, women and marginalized groups, and inadequate roads and transport limit proximity to healthcare facilities. Health insurance provision thus requires adequate supply of delivery sites near insured patients (to offset lost wages and the large travel and lodging costs incurred). In terms of disease, India accounts for a large share of the global burden of maternal deaths (19%), malnourished children (33%), neonatal deaths (29-30%), under-vaccinated children (37-44%), leprosy (50%), and tuberculosis (25-26%).
The balancing acts here seem formidable. Most economists believe it impossible to achieve all three goals simultaneously and, thus, that tradeoffs must be made. Underlying the new reform is “the triple aim”: improved quality, reduced cost, and improved “population health”, but it is unclear whether all of this is achievable.
This discussion is pertinent to India’s healthcare system because there are at least two efforts underway on the subcontinent to solve the iron triangle in the delivery of healthcare. Firstly, medical tourism promises high quality, lower cost, and more accessible care compared to what patients in other countries can find. Secondly, some specialty hospitals in India appear to achieve all three goals in providing care to the “bottom of the pyramid”.
Frameworks for Analyzing Healthcare Systems
Researchers at the World Bank and the World Health Organization (WHO) have developed a “Control Knobs” framework that analyzes the policy levers used to impact the intermediate outcomes of cost, access, and quality (the vertices of the iron triangle) and hopefully the ultimate outcomes of improved health status, protection from the financial risks of illness, and consumer satisfaction.1 These policy levers – the financing, payment, organizational, regulatory, and behavioral initiatives – are conditioned by the country’s economic, social, and cultural context (Figure 2). This framework is helpful for understanding the broader societal and regulatory constraints within which a healthcare system operates.
A portion of this framework explicates some of the issues facing India’s healthcare system. Historically there has been a de-emphasis on public health and the conceptualization of health as the state’s responsibility. There also exists a two-tiered system that segregates the mass of the (impoverished) population in public, and rural facilities; while the largely urban-based middle and upper classes utilize private facilities. The cultural phenomenon of the system of castes and tribes mean that many face limited access to urban and private healthcare services. While certain physicians practice allopathic medicine, other classes practice and deliver more traditional forms of healing. Women also have a lower social status, and face restricted access to healthcare services, and India’s rich variety of festivals which run for days lead to over-eating and reduced access to providers. Community networks, such as the role of grandparents in the nuclear family and the use of Bais (family helpers, e.g. for parents with dementia), provide an informal system of care which substitutes organized initiatives in long-term care. Such networks have also facilitated the formation of voluntary insurance schemes that have widely expanded coverage for catastrophic care. Finally, the system is shaped by environmental factors, such as the prevalence of infectious diseases which led governmental health policy, following Independence, to orient around “vertical health programs”. The programs were implemented to deal with such diseases on an individual basis.
India is also hampered in terms of the “policy levers” at its disposal to change the system. In terms of financing, India spends roughly 4% of its GDP on healthcare, and only about $54 per capita (2010 data) or $132 per capita (2009 data, adjusted for purchasing power parity). The vast majority of healthcare expenditures (ranging from 67-70% over the last few years) are paid out-of-pocket by the population, whereas the government accounts for only 30-33%.2 While there is an emergent micro-insurance and private insurance sector, there are little means to finance broader access to healthcare. Among physicians, there is also little price (fee) transparency, few medical audits, and deficient record keeping. Most providers work in the private sector and are not employed by hospitals or other large firms, and with regards to regulation, there has been little regulatory oversight or enforcement.
Another complementary framework is the healthcare value chain.3 Here, the buyers and suppliers of products and services of a healthcare system within this chain engage in the market exchanges that comprise this system, their activities adding value to system outputs as they move along the chain. This highlights the upstream (supplier) and downstream (buyer) trading partners of any healthcare firm, parties that may mediate these transactions, and the possible competitors and substitutes for the firm’s product/service. India has not yet developed all of the value chain players, but its trajectory suggests continued expansion and eventual development of these stages. Indeed, some of the Indian states have modeled what a value chain might look like and where their efforts to develop using this framework currently stand (Figure 3).
Major Transitions in India
India is the world’s second most populous nation (1.21 billion people in 2011) and is expected to reach 1.35 billion by 2022. The urbanization and concentration of the Indian population is clear; while 25% of the population resided in cities by the end of the 1980s, this increased to 31% (2011), and is expected to exceed 55% by 2050.
Two additional demographic trends are longer life expectancy and the growth of the elderly population (in absolute numbers, not as a percentage of the total population). Life expectancy at birth for males soared from 32.1 years prior to Independence (1941) to 65.8 (2006-2010), and continues to rise. This will swell the ranks of the chronically ill and increase demand for acute hospital care and long-term care. Demand will also be fueled by the growing literacy of the population and their growing awareness of the treatments available.
Moreover, India simultaneously faces a decline in fertility and the breakdown of the extended family (particularly as women join the labor force and the young migrate to cities in search of work). The birth rate per 1,000 population declined from 29.5 (1991) to 22.1 (2010). The population growth rate slowed from 1.98 (1991) to 1.34 (2009), while the natural growth rate slowed from 19.7 (1991) to 14.9 (2010). During the same time period, the total fertility rate dropped from 3.6 (1991) to 2.5 (2010). These declines will eventually compound problems of financial and caregiver support of the elderly and create demand for long-term care services. Indeed, new social programs are being developed for the elderly and other vulnerable populations left without extended family, including the disabled, drug addicts, street children, child laborers, and those with HIV.
India has also witnessed an increase in accidents, injuries, and road fatalities. This stems from a rise in the number of vehicles on the road, and the frequently chaotic behavior of drivers. This has placed even greater burdens on a healthcare delivery system that lacks a “911” system, public awareness of the Emergency Medical System (EMS) and first aid skills, sufficient availability of emergency and trauma services, and proper emergency equipment. As a result of delays in treatment and lack of access to specialized care, injury is India’s third leading cause of death.
India has been hailed for its rapid economic development between 1990 and 2010 following economic liberalization. The country’s rate of GDP growth averaged 6.6% over this time period. As a result, the incidence of poverty was nearly halved between the late 1970s (51.3%) and the late 1990s (28.6%). By 2004-2005, urban poverty levels had declined to 26%, while rural poverty rates dropped to 28%. The varying definitions of poverty-line status suggest the number of absolute poor ranges from 330-480 million people. According to Census data, literacy rates have also risen from 52.2% (1991) to 74.0% (2011).
However, despite the economic growth and the resultant increase in personal incomes and tax revenues, India has not increased public spending on healthcare in a commensurate fashion. In fact, liberalization was accompanied by reductions in central government spending on healthcare in order to shrink public deficits and encourage the development of the private sector.
There is growing prominence of chronic illness among the population typical of countries that increase their national wealth. In particular, India has increasing cases of Western-style conditions such as diabetes, hypertension, and obesity, and growing presence of heart disease and cancer-related illnesses. For example, 700,000 new cancer cases are diagnosed in India every year; 800,000 die of the disease annually. In 2004, chronic diseases accounted for an estimated over 50% of the 10 million deaths, compared to 37% of deaths due to communicable diseases, maternal and perinatal disorders, and nutritional deficiencies. Cardiovascular diseases and diabetes are the second leading cause of death in India behind tuberculosis (TB). Among the bulk of the adult population, cardiovascular diseases account for roughly 25% of all deaths. This reflects India’s rapid change in lifestyle, in diets, and increasing levels of stress due to urbanization, decrease in physical activity, and genetic predisposition to heart disease risk factors.
In addition to chronic diseases, India has witnessed the growth of illnesses such as HIV/AIDS and TB, the latter of which is the highest cause of death, now accounting for over 25% of all cases worldwide. India’s TB rate is double that of China. Obstacles obstructing the combatting of it include the lack of access to treatment, the need for long-term treatment, the cost of missing work in order to seek treatment, and the stigma attached to treatment. As a result of these factors, there is a growing problem of drug-resistant TB in India that requires a longer and more expensive treatment regimen, and threatens the entire world.
India has progressed in attacking chronic diseases through a series of national policies and programs. However, these programs have focused on specific targets (cancer, vision, mental health, diabetes, TB) with technological responses – eschewing integrative, multi-component interventions – and have oftentimes been unevenly implemented geographically. The disparities in treatment for chronic disease are enormous between urban and rural populations and between wealthy and poor populations (two to twenty times). Episodes of hospital care for chronic disease are twice those for infectious disease, with higher expenditures overall and higher expenditures on private sector services. Expenditures on chronic diseases accounted for 45% of average monthly income for the highest income group and 70% for people in the low-income groups.
The interaction of these two transitions – urbanization and chronic illness – will have enormous effects on India. The rise in lifestyle diseases in urban areas will spur an increase in inpatient hospital admissions and costs, and is projected to account for a $236 billion in lost productivity between 2005 and 2015. The relative frequency of treatment for lifestyle and chronic illness conditions varies between inpatient and outpatient settings. Compounding both of these trends is longer life expectancy and the growth of the elderly population.
Implications for India
All of these transitions will increase demand for healthcare services and insurance coverage to pay for them. They are reinforced by a series of parallel transitions enabling this demand to be realized: private sector employment, rising income levels, a growing supply of medical professionals, increased investment in healthcare infrastructure, and increased government investment in transportation and telecommunications infrastructure that will extend the reach of providers and manufacturers into rural areas.
India’s economic growth has led to the co-presence of “Two Indias”: a shimmering India with an urban and increasingly middle and upper-middle class which purchases allopathic medicine in the private sector, and a shivering India with a large population of rural and urban poor who rely more on traditional medicine and the public sector. The Two Indias are characterized further by a mismatch in population and healthcare infrastructure: whereas 69% of the population reside in rural areas, 75% of the allopathic medical infrastructure is located in urban areas.
Public Health Issues
Since Independence, India has made great strides in public health. The death rate fell from 25.1 deaths per thousand (1951) to 7.2 (2010). Malaria cases have also dropped; and smallpox, polio, and leprosy are nearly contained. Nevertheless, there are huge differentials between urban and rural areas here. For example, the infant mortality rate in rural areas (55 per 1,000 births) dwarfs that in urban areas (34). The country also faces a host of public health issues, with India contributing to one-fifth of the world’s diseases and accounts for 18% of deaths worldwide.
These problems are exacerbated by India’s large population, by rapid (largely unplanned) growth, urbanization, industrialization, and widespread use of pesticides and fertilizers in agriculture. Chief among these problems is water supply and sanitation; India lags behind fellow BRIC nations (Brazil, Russia, and China), as well as most other developing nations, in the percentage of its population with access to safe drinking water and sanitation.
Due India’s low literacy rate (an estimated 26% of the Indian population), people have limited understanding of the importance of sanitation and personal hygiene, which contributes to the problem of water-borne illnesses.
Furthermore, according to 2011 survey data, an estimated 42% of Indian children under five suffer from malnourishment (defined as being moderately or severely underweight). Malnutrition in India accounts for roughly one-third of the world’s total figure, and causes one-third to one-half of all deaths among children under five. India’s IMR (47.6 deaths per 1000 live births, 2011 estimate) ranks among the highest 25% globally.
Part of the current problem is a lack of a formal department of public health in the central government ministry with responsibility for healthcare. The medical profession also has lack of appreciation for public health, and there are misguided public beliefs about the origins of diseases. Historically, the government has attacked these through vertical disease control programs, with great duplication across programs and no coordination between them. Moreover, the program funding was oriented to new infrastructure, leaving the states to finance their continuing operations and staffing (which they were often unable to do).
This article has described a variety of lenses and frameworks through which one can begin to analyze India’s developing healthcare system. None are inherently superior or inferior. Instead, they alternatively highlight goals and tensions, structures, functions, corporate and individual actors, flows and exchanges, and dynamic transitions.
The book on which this article is based relies on a value chain framework that focuses on the major actors and the economic exchanges (as buyers and sellers) between them. We loosely adopt that framework to focus on several of the key actors in India’s healthcare system: hospitals, physicians, insurers, other payers and financiers (e.g., foundations and private equity), pharmaceutical firms, biotechnology firms, and medical device firms. Consistent with the Control Knobs approach, we also spend considerable time describing the wider societal context underpinning India’s healthcare system, and the policy levers used in the past to achieve its desired intermediate and ultimate ends.
This article is taken from Lawton Robert Burns, India’s Healthcare Industry: Innovation in Healthcare Delivery, Financing, and Manufacturing, Chapter 1 (New Delhi: Cambridge University Press, 2014).
About the Author
Lawton Robert Burns, Ph.D., MBA, is the Chair of the Health Care Management Department, the James Joo-Jin Kim Professor, a Professor of Health Care Management, and a Professor of Management in the Wharton School at the University of Pennsylvania. He is also Director of the Wharton Center for Health Management & Economics, and Co-Director of the Roy & Diana Vagelos Program in Life Sciences and Management. Dr. Burns has analyzed physician-hospital integration over the past 25 years. He teaches courses on healthcare strategy, strategic change, strategic implementation, organization and management, managed care, and integrated delivery networks.
1. William Hsiao, What Is A Health System? Why Should We Care? (Cambridge, MA: Harvard School of Public Health, August 2003).
2. R. Srinivisan, Healthcare in India – Vision 2020: Issues and Prospects. Available at:
http://planningcommission.nic.in/reports/genrep/bkpap2020/26_bg2020.doc. Accessed on November 21, 2011.
3. Lawton R. Burns, The Health Care Value Chain: Providers, Purchasers, and Producers. (San Franciso: Jossey-Bass, 2002).