Health Economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and health care. Studies in this sphere provide information to decision makers for efficient use of available resources for maximizing health benefits. Economic evaluation is one part of health economics, and it is a tool for comparing costs and consequences of different interventions. This essay focuses on the work of a British health economist, Alan Williams, and his contributions to the subject such as cost-effectiveness analysis and the QALY, in context to health-care inequalities and inadequacies faced in one of the fastest growing economies of the world, India.
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The Indian health care sector is one of the rapidly growing industries in the country and also contributes to its overall development. After Independence there has been a significant improvement in the health status of the people. However, according to the reports of the World Health Organization (WHO), people who pay for their health care services suffer “catastrophic costs”. While a vast part of India consists of the rural population, some well below the poverty line, a relatively lesser majority belongs to the modern urban and rich circle hence causing a disparity in health-care access and facilities. In general, rich people have better health and live longer than poorer people. Many of the underprivileged population suffer and die in absence of access or inability to afford medical care and others endure because they end up paying through debts, selling assets and so forth. It is unfortunate that while the incidence of all diseases are twice higher in rural than in urban areas, the former are denied access to proper health care, as the systems and structures were built up mainly to serve the better off. While the urban middle classes in India have ready access to health services that compare with the best in the world, even minimum health facilities are not available to at least 135 million of rural and tribal people, and wherever services are provided, they are inferior. Hence, a comprehensive National Policy addressing the existing inequalities, and work towards promoting a long-term perspective plan exclusively for rural health is the current need.
Alan Williams in his 1985 article on “Economics of coronary artery bypass grafting” explains how to allocate limited resources to maximize the population health, i.e., cost-effectiveness of medical interventions and health benefits related to resource costs. To understand how this analysis fits into the problem of inequity in health-care, it is important to highlight some of the major drawbacks of health-services in India and how the theories put together by Williams might help the policy-makers to focus on the needs of the poor.
The following are the key problems of health-services:
- Neglect of rural population: A serious shortcoming in India’s health-service is the neglect of rural masses. It is largely a service based on urban hospitals. Although there are a large number of public health centers and rural hospitals, the urban bias is visible. According to health information, 31.5% of hospitals and 16% hospital beds are situated in rural areas where at least 75% of total population resides (Economics discussion (2016)).
- Inadequate Outlay for Health: According to the National Health Policy (2002), the government contribution to health sector constitutes only 0.9% of the GDP, which is quite insufficient as compared to other nations such as China, Sri Lanka or USA where the same is about 45.4%. The discouragement and frustration with the developing ineffectiveness of the government sector is gradually driving poor people to seek help of the private sector, thus forcing them to spend huge sums of money on credit. This is the main cause of low health standards in the country.
- Shortage of Medical Personnel: In India, shortage of medical personnel like doctors, a nurse etc. is a basic concern in the health sector. In 1999-2000, while there were only 5 doctors per 10,000 residents in India, the same was 25 in the USA and 20 in China (Economics discussion (2016)). Similarly, the number of hospitals and dispensaries is insufficient in comparison to our vast population.
- Medical Research: Medical research in the country needs to be focused on drugs and vaccines for tropical diseases that are normally ignored by international pharmaceutical companies on account of their limited profitability potential. The National Health Policy (2002) suggests allocating more funds to boost the study in this direction.
- Expensive Health Provision: In India, health-services especially allopathic are quite expensive, which is sometimes out of reach for the common man. Prices of various essential drugs have gone up. Therefore, more importance should be given to the alternative systems of medicine. For example, Ayurveda and Homeopathy, which have been common for a long time.
- Emphasis on Culture Method: The health system of India depends almost on imported western models. It has no roots in the culture and tradition of the people. It is mostly service based on urban hospitals. This has been at the cost of providing comprehensive primary health care to all. Otherwise, it has completely disregarded preventive, pro-motive and public health measures.
Health care can be seen as an immediate product, in the sense of being a means to the end of improved health. To prioritize and allocate scarce resources in an efficient way to benefit the people at large was what Alan Williams believed in and thus he formulated his analysis of cost-effectiveness. Such an economic evaluation is a critical tool for decision-making because it involves both a cost side and a benefit side, which are being weighed against each other. Cost-effectiveness is the degree to which something is effective or productive in relation to its cost. It is composed of 2 parts:-
a) Costs (mainly resource costs and opportunity costs)
b) Effectiveness (measured in terms of QALY gains)
Costs: Costs are a function of resource quantities and their unit price. Firstly, the resources devoted to diagnosis and treatment include costs to the services plus those falling on patients and their families. These can be classified as direct costs. The term “indirect cost” is used in health economics to refer to the productivity losses related to illness or death. Usually, direct costs arise from resource usage, whereas indirect costs arise from loss of productivity due to morbidity/mortality. Regarding the benefit side, this is composed of the “utility”, the value of the health outcome that can be received for the single patient as well as, for example the patient’s relatives. In publicly funded health care systems, limited resources restrict the provision of every available intervention in every situation for all who need or want it. Choices must be made among effective health care involvements, and the decision to fund one, particularly the poor people means that others cannot be funded. Secondly, the opportunity cost of any good (including service) is the satisfaction or benefit forgone in not being able to use the resources involved to obtain some other good or service. With respect to the Indian health scenario, the opportunity cost can be the one of treating inpatients in terms of outpatients. The difference between an inpatient and outpatient care is how long a patient must remain in the facility where they have the procedure done. Keeping in mind the urban bias mentioned before, inpatient care for the rural population must be in action more often as healthy sanitation facilities outside the premises of the hospital environment is almost inaccessible making health issues confronted by the people diverse.
Effectiveness: It is determined in terms of Quality-Adjusted Life Years (QALY’s), which is a measure of the length of life (expressed in life-years) weighted by the health-related quality of life valued by a preference–based score. It is also composed of 2 parts:
(i) Survival Gain: It explains the number of years added to one’s life span, i.e., living longer.
(ii) Health-Related Quality of Life Gain: It defines an individual or group’s perceived physical and mental health over time. Describes reduced pain, increased physical functioning and improved mental health.
The large population of cancer patients in India is struggling with the prohibitive cost of cancer treatment. The disease has wiped out entire life savings and even forced some people to sell their homes. Although relatively cheaper than in the West, cancer treatment is still unaffordable for poor and middle-class Indians, who often do not have health insurance and cannot avail the best of treatments abroad. A multicentric study that included India developed a global pricing index for new cancer drugs in patients with metastatic colorectal. A decision model was employed in this cost-effectiveness analysis in which costs were obtained from both public and private hospitals in India. The study found a QALY gain with more than $200000 to administer new treatment as first-line for colorectal cancer. Similarly, decision analysis modeling was used to estimate a more affordable monthly cost in India for a hypothetic new cancer drug that provides a 3-month survival benefit to Indian patients. The data collected from the experiment suggested that a price of $98.00 per dose would be considered cost-effective from the Indian public health care perspective. If the drug were able to improve the patient’s quality of life above the standard care of survival from 3 to 6 months, the price per dose could increase yet offer the same value. Thus, it was recommended that the use of the WHO criteria for estimating the cost of a new drug on the basis of economic value for a developing country such as India is feasible and can be used to estimate a more inexpensive cost on the basis of societal value thresholds, in particular, the residents of the rural (Dang et al. (2016)).
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The growth of private health care sector has been largely seen as an advantage, however it adds to ever-increasing social contrast. The dominance of the private sector not only denies access to poorer sections of society, but also skews the balance towards urban-biased, tertiary level health services with the profit motive taking over equality. The rising cost of health care is making the same exorbitant for a growing number of people. It has almost doubled in the last decade. Over 20 million Indians are pushed below the poverty line every year because of the effect of out of pocket spending on something as basic as health and sanitation care. In the absence of an effective regulatory authority over the private sector, the quality of medical services available to the vast majority is constantly falling. This re-emphasizes the role socio-economic inequality plays in health care delivery.
To improve the prevailing situation and to make a national health system that works, more medical and nursing school will need to be set up and millions more basic health workers will be required, particularly in villages. The problem of rural health must be addressed both at the macro (national) and micro level (state and regional) in a holistic way, with genuine efforts to bring the poorest of the population to the centre of the fiscal policies. Costs should be designed such that the low-income group is within its reach and can avail the best of treatments. Also, the focus should shift from gaining profits to increasing the life span of the patients. While some organizations do provide service through opening medical facilities in inner town areas or advocating for infrastructural change (e.g. improving water sanitation), many others should consider educating the population on health care resources through community-based health care programs. Generally, better health of the rich while the poor struggle to gather the facilities is a reflection of the inequality and adversely affects the health of the under-privileged. If policy-makers focus on Williams’ theories of cost-effectiveness and QALY gain to mend the apparent gap between the rich and the poor, it will be a step further to overall development. These methodologies can form the basis of decision-making on pricing, reimbursement and future investments in the Indian health care system to suit the people, keeping in mind the requirements of the poor.
- Dang, A. et al., (2016). Importance of Economic Evaluation in Health Care: An Indian Perspective [online]. 9, 78-83. [Viewed 10 May 2019]. Available from: https://www.sciencedirect.com/science/article/pii/S221210991500103X
- Goyal, R. et al., (2002). Current Health Scenario in Rural India [online]. 10, 129-135. [Viewed 11 May 2019]. Available from: https://pdfs.semanticscholar.org/3cf9/cc30dbda1bc134cd497f566491db48eeacdc.pdf
- Deogaonkar, M., (2004). Socio-economic inequality and its effect on healthcare delivery in India [online]. [Viewed 12 May 2019]. Available from: https://www.sociology.org/ejs-archives/vol8.1/deogaonkar.html
- Williams, A., (1985). Economics of coronary artery bypass grafting [online]. 291, 326-328. [Viewed 9 May 2019]. Available from: https://pdfs.semanticscholar.org/fa4b/6c654a283b4582e80faa39c31014043fae92.pdf
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