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Healthcare takes centre stage, finally! 163

Figure 17: Mortality due to poor quality health care by country

5.26 In fact, Kane and Calnan (2017) highlight the erosion of trust in the Indian healthcare
sector. To understand the difference in quality between the public and private sector providers,
we use data from PMJAY. Among the most common metrics of quality in the hospital setting is
unplanned readmissions (Mohpal et al., 2020). Readmissions typically impose a heavy burden
on patients and their families and on health systems in general as a result of unnecessary care. In
general, readmissions are costlier than original admissions. Using the data till November 2019,
it is observed that the average claim amount in a readmission case is INR 19,295 compared
to INR 12,652 in the corresponding original case. The average length of stay is also higher in
the readmission, 7.5 days versus 6.6 days. Crucially, the data shows that the mortality rate for
neonatal procedures is much higher in private hospitals than in public hospitals, 3.84 per cent
and 0.61 per cent respectively. Public sector patients get readmitted to the same hospital 64
per cent of the time versus 70 per cent for private hospitals. About 3/4 of outpatient care and
th
2/3rd of hospitalisation care is provided through the private sector. So, a large proportion of
deaths in India manifesting due to poor quality of healthcare is likely to reflect that the quality
of treatment in the private sector may not be significantly better than that in the public sector in
India. (Basu et al, 2012, Kumar and Prakash 2011, Coarasa et al, 2014, Russo 2015)

5.27 The problem of asymmetric information in healthcare is also reflected in the substantial
variation in costs for treating the same disease between public and private sector. As argued
above, the quality of treatment in the private sector does not seem to be markedly better in
the private sector when compared to the public sector. Yet, the costs of treatment are not only
uniformly higher in the private sector, the differences are humongous for in-patient treatments
of severe illnesses such as cancers (3.7x), cardio (6.8x), injuries (5.9x), gastro (6.2x), and
respiratory (5.2x) (NSSO data, Figure 18 and 19).

5.28 Given the market failures stemming from significant asymmetric information, an
unregulated private healthcare system is clearly sub-optimal compared to a system where
policies mitigate the problem of asymmetric information. Parallels can be drawn from banking
and financial intermediation – another industry that suffers from significant market failures due
to asymmetric information – to design policies for mitigating these market failures.