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154 Economic Survey 2020-21 Volume 1

social distancing in the context of the pandemic. Such individual behavior may not only be sub-
optimal for the individual but also create negative externalities for the entire healthcare system
through higher costs and poorer outcomes. Typically, consumers tend to demand primary care
less than the economically optimal levels as the price elasticity for this product/service is very
high. For instance, among TB patients in Delhi who initially visited a qualified practitioner in
2012, the average length of time from when TB symptoms first appeared to when they reached
a DOTS facility was 5.2 months (Kapoor et al, 2012). Similarly, India has very low rate of
screening for cancers among women in the age bracket of 15-49 years at 22 per cent for cervical
cancer, 10 per cent for breast cancer and 12 per cent for oral cancer when compared to 62 per
cent, 59 per cent and 16 per cent respectively in OECD Countries (NFHS 4 and OECD 2015). In
fact, the privately optimal preference for primary care may be so low that individuals may have
to even be paid to use adequate primary care. Individuals also under-estimate health risks and
may, therefore, not purchase adequate health insurance.

Need for system design in healthcare

5.11 Given these market failures, a free market where individual consumers purchase services
from providers on their own while paying at the point of service leads to severely sub-optimal
outcomes including demand that can be influenced and induced by suppliers, over-seeking of
hospitalization and under-seeking of primary care/public health when compared to economically
optimal levels, and catastrophic out-of-pocket spending in part due to the low preference for
health insurance. Therefore, most well-functioning health systems are structured as oligopolies
purchasing from oligopsonys instead of individual consumers purchasing from individual
providers. The structure of the market has substantial implications for long term trajectory of the
health system. Countries with more fragmented health systems tend to have lower performance
as reflected in higher costs, lower efficiency, and poor quality. Therefore, in addition to providing
healthcare services and financing healthcare, a key role for the government is to actively shape
the structure of the healthcare market.

COvId-19 aNd INdIa’s HeaLtHCare POLICy

5.12 Following the COvID-19 pandemic, a key portfolio decision that healthcare policy must
make is about the relative importance placed on communicable versus non-communicable
diseases. The COvID-19 pandemic has spread worldwide because it is a communicable disease.
The previous such pandemic occurred more than a century back when the Spanish Flu pandemic
devastated the world in 1918. As pandemics represent rare events, healthcare policy can become
a victim of “saliency bias”, which involves over-weighting recent phenomena. 71 per cent of
global deaths and about 65 per cent of deaths in India are caused by non-communicable diseases
(NCDs) (Figure 4, Panel a). Between 1990 and 2016, the contribution of NCDs increased 37 per
cent to 61 per cent of all deaths (National Health Portal, n.d.). Further, preventing communicable
diseases requires focus on better sanitation and drinking water, which the Swachh Bharat and
the Har Ghar Jal Abhiyan campaigns are focusing on.