Health Care Financing in India Nachiket Mor
There are two key health-financing questions for India: (a) where should the money to pay for health care come from; and (b) how should it be spent? Health care is a service with some peculiar characteristics that need to inform the search for answers to these two questions. There are three characteristics in particular that are very important and which any good health-financing design would need to address. 1. The presence of large health shocks: While a great deal of health care expenditure at an individual or a household level has a regular, repeated character, in the lives of most individuals there are sudden, unexpected health shocks that can cost a great deal of money. The only way to manage this is to ensure that there is good pooling across a large group of households. However, for a variety of reasons, this does not happen naturally even if people have the money or are given it to enter such pools through the voluntary purchase of health insurance. Some form of a regulatory mandate is essential to ensure that this happens. 2. Poor health-seeking behavior: This is linked closely to the understanding that individuals have about their own health status and what is best needed for their own good health, which often tends to be very poor and incomplete. This results in very high price elasticity for primary/preventive health care, but very low elasticity for higher levels of health care, which leads to highly distorted consumption patterns. There is limited evidence that improved health literacy has any impact on this. What is needed instead is a strong sense of direction and regulation of health care which would require and incentivize individuals Harvard South Asia Institute 35