Health Financing in India

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Institute for Financial Management and Research Centre for Insurance and Risk Management

Delivering Micro Health Insurance Through the National Rural Health Mission A Strategy Paper

Rupalee Ruchismita, Imtiaz Ahmed and Suyash Rai

August 2007

Rupalee Ruchismita (rupalee.ruchismita@ifmr.ac.in) and Imtiaz Ahmed (imtiaz@ifmr.ac.in) are with the Centre for Insurance and Risk Management at IFMR, Chennai (http://ifmr.ac.in/cirm). Suyash Rai is with the ICICI Centre for Child Health and Nutrition, Pune. The views expressed in this note are entirely those of the authors and do not in any way reflect the views of the Institutions with which they are associated.

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Ruchismita, Ahmed, Rai: Delivering Micro Health Insurance through the National Rural Health Mission

Contents
1 Introduction 2 Health Financing in India 3 Key issues in Health Financing 4 Exploring Risk Transfer and Pooling Strategies 5 Proposal for a National Apex Body 6 Conclusion 7 Annexures 7.1 ANNEXURE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 ANNEXURE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Objectives, Activities, and Services . . . . . . . . . . . . . . . . . . . . . . . . 1 1 3 4 8 13 14 14 19 22

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Ruchismita, Ahmed, Rai: Delivering Micro Health Insurance through the National Rural Health Mission

1 Introduction
The Indian health scenario is fairly complex and challenging with successful reductions in fertility and mortality offset by a significant and growing communicable as well noncommunicable disease burden1 , persistently high levels of child undernutrition2 , increasing polarisation in the health status of the rich and the poor3 and inadequate primary health care coexisting with burgeoning medical tourism! This situation is further complicated by the presence and practice of multiple systems of medicine and medical practitioners (several of whom are not formally certified and recognised) and very limited regulation. In such a context, this paper highlights the challenges in financing health in India and examines the role of health insurance in addressing these. It proposes an operational framework for developing sustainable health insurance models under the National Rural Health Mission, responding to the contextual needs of different states.

2 Health Financing in India
The total spending on the health sector in India is not low. According to the National Health Accounts 2001-02, the total health expenditure in India for the year was Rs. 1,057,341 million, which accounted for 4.6 percent of the Gross Domestic Product (GDP). The concern lies in the fact that households are the major financing sources, accounting for 72 percent of the total health expenditure incurred in India. State Governments contribute 12.6 percent of the total health expenditure, Central Government 6.4 percent and the public and private firms 5.3 percent. External support from bilateral and multilateral agencies accounts for 2.3 percent of health expenditure in India, a majority coming in as grant to the Central Government. So, only about 20% of the overall funding comes from India accounts for only 16.5% of the global population, it contributes to approximately a fifth of the world’s share of diseases: a third of the diarrheal diseases, tuberculosis, respiratory and other infections, parasitic infestations and perinatal conditions; a quarter of maternal conditions; a fifth of nutritional deficiencies, diabetes, cardiovascular diseases, and the second largest number of HIV/AIDS cases in the world. (Report of the National Commission on Macreconomics and Health. 2005. New Delhi: Ministry of Health and family Welfare.) 2 National Family Health Survey III, 2005-06. Mumbai: International Institute of Population Sciences. 3 The poorest 20 percent of Indians have more than twice the rates of mortality, malnutrition, and fertility of the richest 20 percent. (Peters DH et al. Better Health...
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