Reaching The Bottom Of The Pyramid


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Reaching The Bottom Of The Pyramid

  1. 1. Reaching the bottom of the pyramid 2007
  2. 2.  A look at Healthcare in India  Our Goals and Challenges  Improve Access  Reduce cost of creation  Increase Trained manpower  Healthcare- Opportunity  Summary
  3. 3. Healthcare, an important economic enterprise in developed countries Fact #1 Most developed countries and developing countries spend almost 15% of the GDP on Healthcare and this sector is among the largest employers. The healthcare sector in India employs over 4 million people, one of the largest employers Fact # 2 Healthcare coverage is almost 100% in many of the developed countries Fact # 3 Access to healthcare improves the efficiency of the work force and significantly contributes to economic growth
  4. 4. Healthcare, an important economic enterprise in developed countries Fact # 4 Healthcare sector need between now and the year 2020 is between Rs 150,000 crore to Rs 175,000 crore (%s 1,500-1,750 billion) to reach bed capacity as per WHO norms Fact # 5 In Health „PREVENTION ' is always better than `CURE‟
  5. 5. Indian Healthcare - At Crossroads Large gains in healthcare status. Remarkable improvements in mortality and fertility rates However Hospitalization frequently means financial catastrophe Only 10 percent of Indians have some form of insurance, Hospitalized Indians spent more than half (58%) of their total annual expenditures on health care More than 40 percent of those hospitalized borrow money or sell assets to cover expenses Current infrastructure grossly inadequate India has 1.5 beds per thousand people, compared to 4.3 beds per thousand people, in middle-income countries.
  6. 6. Healthcare Infrastructure in India STATUS: Underdeveloped in comparison to other countries Beds Physicians Nurses Per ’000 population Per ’000 population Per ’000 population 0.5* India 1.5 1.2** 0.9 Other low income countries (e.g., sub-Saharan Africa) 1.5 1.0 1.6 Middle income countries (e.g., China, Brazil Thailand, 4.3 1.8 1.9 South Africa, Korea) High income countries (e.g., US, Western Europe, 7.4 1.8 7.5 Japan) World average 3.3 1.5 3.3 *Registered allopathic physicians only ** Including registered Indian Systems of Medicine (ISM) physicians but excluding unregistered practitioners Source:Asian Health Services; Indian Nursing Council; World Development Indicators; World Bank; McKinsey analysis
  7. 7. Key Health indicators Though there has been significant India has a long way to go to meet improvement… world standards Life expectancy at birth Years 78 63 65 Life 37 expectancy Developing Developed India 1951 India today country average country average Infant mortality De aths pe r '000 bir ths 56 Infant mortality 146 70 6 Developing Developed India 1951 India today country average country average DALYs* Pe r '000 population 256 339 119 Morbidity 274 Developing Developed country average country average India 1990 India today *Disability adjusted life years Source: Global Burden of Disease, WHO 1996, World Bank Report, 2001
  8. 8. CENTRAL GOVERNMENT EXPENDITURE ON HEALTH DECLINING Issues In Current Healthcare Delivery System % Plan Expenditure (Actuals) 3.5 3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 First Second Third Fourth Fifth Sixth Seventh Eighth Five Year Plans Contrary to popular perception, the role of the government in this sector has been continually shrinking during the last 20 years and the private sector now accounts for over 68 per cent of total spending in this industry. Where does the money come from Now?
  9. 9. Improvement in health can impact long-term economic growth through multiple channels Healthcare outcomes Impact on macroeconomic drivers of growth Consumption Lower Reduced absenteeism Human capital prevalence of Increase in individual income diseases Increase in productivity Increase in education levels Investment Improvement in healthcare Economic system Greater share of growth population at working age Decrease in infant Human capital mortality rate Increase in individual income Consumption Increase in due to greater number of working years life expectancy Increase in share of Investment population with high savings rate Parents do not need any more to have many children just to assure themselves that at least one of them will survive till the parents’ old age Source: Macroeconomics and Health, WHO 2001
  10. 10. The Healthcare Delivery Sector Plays An Important Role In The Economy Today Sector Direct employment Revenues/GDP Million, 2000-2001 Per cent, 2000-2001 Healthcare 4.0 5.2 Education 5.3 4.8 Retail banking Healthcare is the largest 1.0 3.5 service industry in Power 1.2 3.0 terms of revenues and Railways the second largest after 1.6 1.8 education in terms of Telecom 0.8 1.4 employment Hotels, restaurants 1.7 0.9 IT 0.4 1.7 Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
  11. 11. Our Goals Create a robust healthcare model by  Improve access  Reduce Cost of Creation  Increase trained manpower
  12. 12. Goals and Key Challenges Goal Elements Key Challenges • Address all income segments with wider care options Improve Access • Development of new models • Telemedicine Reduce cost • Government to play a larger role of creation • Low paying capacity of addressable population • High cost of inputs (e.g. medical equip., drugs ) Increase • Professional expertise & training trained • Technology, newer tools, clinical research, telemedicine manpower
  14. 14. Less than 15% of the Indian population is formally covered through prepayment ~5 ~14 ~5 Additionally, government provides 3.4 coverage through free 0.4 access to its facilities Type of Private health Social Employer’s Community Total coverage Insurance Insurance spend Insurance (ESIS) •Premium paid •Mandated •Reimburse •Schemes through wage-based ment or free managed by a employer’s contribution access to local provider, Description health plan or from employer NGO or a directly by employees facilities welfare body individual and employers
  15. 15. Each type of prepayment faces issues of either reach or quality Type of coverage Key issues Private health •Growth of private health insurance constrained by regulatory and insurance systemic barriers Social •Insufficient utilization of healthcare funds insurance •Poor quality of care at ESIS facilities Employer‟s •Healthcare is not part of employer’s core business, but employer’s spend cover is necessary in absence of effective insurance schemes Community •No large-scale development of community schemes across the country insurance •The scale of government spending is low compared to other developing Government‟s countries spend •The expenditure is inequitable as the spend mostly benefits the richer segments of the population
  16. 16. The low levels of activity in health insurance can be attributed to regulatory and systemic barriers Barriers Key issues* Implication 40% equity cap •Difficult to find a local partner in a less on MNC understood, risky business participation Regulatory Solution : Increase FDI limit to 49% High capex •High premia needed to compensate for Investment requirement of Solution : Decrease capital requirement to Rs.50crore Rs. 100 crore Systematic barriers No habit of •Higher marketing costs to educate customers prepayment about insurance 1. Customer attitude High levels of •Claims ratio will be higher for existing products fraud Solution : Co-Payments to be made mandatory 2. Competitive •Mediclaim products priced at a low level scenario Low premia •No standardization of treatment protocols and 3. Provider Providers not quality, either through registration or accreditation unpreparedness standardised •Huge base of small practices limits rapid networking •Easier for providers to perpetrate fraud Solution : Make accreditation mandatory for 4. Payer providers wishes to be part of network unpreparedness •Unable to design schemes that are profitable No habit of Solution : Make healthcare insurance mandatory in prepayment organized sector Source: McKinsey analysis
  17. 17. Challenges in Social insurance Challenges Key issues Solution Poor State Contract private hospitals at negotiated rates Infrastructure Workers shall be free to choose contracted providers Role conflict: Payer as well Poor quality in Privatise existing ESI hospitals as Provider ESI hospitals Build Super speciality hospitals and hand them with low over to operators occupancy Case Study 1: Thailand Government introduced compulsory social health insurance for all employees of companies with more than 10 employees. Scheme funded equally by employer, employee and government Result Provider network increased substantially Patients at lower cost availed better quality care Source: McKinsey analysis
  18. 18. In Thailand, social insurance acts only as payer and contracts with public and private providers on a capitation basis Impact on providers Creation of Social Security Scheme (SSS) •The scheme has stimulated the •Government introduced a compulsory social health development of network of providers in insurance scheme following the enhancement of who are sub-contracted to provide regulation in 1990 service •All employees of companies with a workforce of 10 •Private hospitals have responded or more are entitled to hospital and ambulatory care more rapidly than public ones, and under a scheme funded equally by contributions from increased their share of the market employees, employers and government from 17% to 55% between 1991 and 1998 •Eligible public and private hospitals, that is those who meet specified standards, can register to •SSS patients have both lower costs become “contractors” and shorter stays than other types of patients at both public and private •Workers are free to choose where to obtain care hospitals from among contracted hospitals Source: Mills, 2000; McKinsey analysis
  19. 19. To Increase Efficiency And Effectiveness, Government Should Split Its Roles As Payer And Provider Objectives From… …To Network of public High autonomy of facilities managed management (finance, by health human resources, etc.) departments Mix of public and private Splitting the payor and Increase Limited decision- providers who respond efficiency of making at local better to patients' needs provider roles creates a level and preferences delivery contract between those No link with private providers who dominate responsible for achieving healthcare delivery today health goals (payor) and those responsible for Public spending Public spending focused on delivering care in a cost- allocated mainly public health objectives to curative and the poor effective and high-quality medicine, utilised Increase mostly by the rich Funds managed at local level manner (provider) through contracts with effectiveness Funds managed by providers (public and of public central/state private) spending government through budgetary allocation Source: McKinsey analysis
  20. 20. Korea has been able to extend social insurance to the whole population Health identified as priority area by government 1970s - one of the “four basic necessities of life” -Key element of labour force productivity Medical Insurance law 1976 -Compulsory in insurance for employees in firms with more than 500 people Coverage -Voluntary community-based insurance for others increased from 14% of 1977 Medical Assistance Programme for poor the population in the mid- 1979-83 Compulsory insurance progressively extended to 1970s to 100% all organised sector (firms with more than 16 in the people) beginning of the 1990s Experimentation of compulsory insurance for 1982 certain self-employed groups, e.g., farmers, taxi drivers. 1988 Social insurance compulsory for everyone Source: Ministry of Health: World Bank report; Bhat (1999); McKinsey analysis
  21. 21. The local nature of community insurance makes it well equipped to cover the informal sector Design, collection and Administration of Provision of care pooling scheme • Affordable premium •Collection mechanism •Local hospital is normally the • Only most required designed to suit needs of provider treatments are covered community •Local hospital may be How • Collection is through •Scheme is administered by incentivised to control costs •Schemes local body and peer a local representative community provide pressure ensures regular •Low administration costs schemes payment (5-8%) tangible work •Fraud is lower due to peer benefits for the pressure community •Less vulnerability to health related poverty •Localised administration to •Involvement of local •Lower costs of •Community representatives involved control fraud levels provider so that fraud is healthcare under control in design •Lean administration to keep Key •Scheme should cover overhead costs low Success critical needs of the Factors community Source: McKinsey analysis
  22. 22. Government role in healthcare is critical in India Role Rationale Importance in India •“Public health is a public good” Finance and everybody benefits from it but 44% of DALYs are provider for nobody is individually ready to pay caused by public health communicable •Government is best positioned to diseases which are finance (though tax) and conduct impacted by the public health programmes (through state of public primary care network) health •Health recognised as a basic human Subsidise right, however poorest segments poorest have limited purchasing power segments 35% of Indians •Government equipped to redistribute below poverty wealth on a large scale through line taxation and budget allocations Source: Global burden of disease. WHO 1996: World Development Report, 2001: McKinsey analysis
  23. 23. Successful Indian Examples of Community Insurance Schemes
  24. 24. Case # 1:Aragonda Hospital Self sustaining model – Each family pays Rs. 1 per day – covers medical treatment upto Rs. 20,000 “Affordable health care for all”
  25. 25. Case # 2: Arogya Bhaghya Yogane Scheme A self funded scheme, launched in 2001 for the Karnataka Police Force covering more than 300,000 employees and their dependents for a monthly contribution (deducted from salary) of Rs.105/- per employee BENEFITS •Coverage for all secondary and tertiary admissions •Coverage upto Rs.100,000/- per family •Cashless treatment at network hospitals •Reimbursement in case of admissions in non-networked hospitals
  26. 26. Case # 3: Yeshasvini A self funded scheme, launched in 2003 for the Karnataka farmers covering more than 17 lakh farmers for an annual contribution of Rs.120/- per farmer BENEFITS •Free OP service •Coverage upto Rs.100,000/- per procedure •Cashless treatment at network hospitals •Reimbursement in case of admissions in non-networked hospitals
  27. 27. Case # 4: SEWA Insurance For women workers of the informal economy who have no fixed employee-employer relationships and depend on their own labour for survival. Mainly 4 types of women workers •Hawkers and Vendors •Home based workers like weavers, beedi workers etc •Manual labours •Small producers SEWA Health Team provides a wide range or primary health care services, but the main thrust is to provide simple, life- saving health information with a focus on disease prevention and promotion of well-being
  28. 28. Case # 4: SEWA Insurance-Scheme details Member Scheme I II III Annual Premium Rs. 85 Rs. 200 Rs. 400 Fixed Premium Rs. 1000 Rs. 2400 Rs. 4800 Sickness Rs. 2000 Rs. 5500 Rs. 10000 Asset Loss Rs. 10000 Rs. 20000 Rs. 40000 Natural Death Rs. 3000 Rs. 20000 Rs. 20000 Member's Accidental Death Rs. 40000 Rs. 65000 Rs. 65000 Husband's Accidental Death Rs. 15000 Rs. 15000 Rs. 15000
  29. 29. Challenges in managing growth of community insurance schemes Challenge Solution • Accelerating growth of community • Educate a large mass of people on the need for health schemes insurance thorough mass communication media •Develop different models and advise the local body/subscribers to choose few •Subsidy from Government •Addressing local requirements •Involve State Governments to provide part of subsidy to cover diseases and treatments most required by community •Mitigating risk for smaller pools •To ensure that risk of having a large number of smaller of community insurance pools is managed, reinsure or underwrite risk thro’ especially in the absence of National Insurance agencies or seek assistance from reserve pool Worldbank Source: McKinsey analysis
  30. 30. Recommendations to seed the growth of community insurance Short term: Seed growth Long term: Formalise growth •Launch pilots in 2-3 states •Provide funds for community schemes -Test 2-3 different designs in varying -Building a contingency fund conditions -Direct subsidy to some schemes -Survey and monitor all existing community schemes •Develop national guidelines for •Leverage existing health workers community schemes (e.g., allowing (government or private) to roll out providers to start community schemes schemes across states without a large capital requirement)
  32. 32. Challenges in attracting investments Challenges Key issues Solution Concessions from Government Investments in Investments Infrastructure status for healthcare semi-urban become industry and rural areas unviable abysmally low Concessional allotment of land in semi-urban and rural areas (Example: Srilanka, Malaysia) Contribution from Government for Self- Funded Schemes (Example : Thailand, Korea) Tax Benefit for contributions Reduce Customs Duty on equipment to Zero level (Example : Malaysia, Srilanka) Encourage Public Private partnerships Source: McKinsey analysis
  33. 33. Public-private Partnerships in Healthcare - Examples Models Options Successful examples Contract out non-clinical hospital Karnataka: Cleaning, maintenance and waste services (e.g. catering, laundry) management contracted out in 82 hospitals Contract out Contract out clinical hospital services Tamil Nadu: High technology services in major services teaching hospitals contracted out (e.g. radiology, pathology) Romania: Output based contracts with private GPs Contract out primary care delivery Tamil Nadu: Management of PHCs by corporate houses with large presence in the area Private Private management of primary Gujarat: PHCs in one district managed by SEWA management facilities of public Brazil/ South Africa: Management of public hospitals facilities Private management of public by private providers with compulsory treatment hospitals for patients funded by the government at a negotiated price Private Build-Transfer-Operate (BTO) or UK: 105 projects as part of the Private Finance Initiative (PFI) attracted private investment of GBP investment to Build-Operate-Transfer (BOT) 2.5 billion meet public Build-Own-Operate (BOO) Australia: 15 hospitals built & operated by private demand sector Conversion US: 300 public hospitals (1/5th of total) converted to from public to Conversion to private, non--profit private (mostly non-profit) between 1985 and 1995 private Conversion to private, for-profit Sweden: 20% of Stockholm county's public hospitals ownership privatized between 1994 & 2002 Source: World Bank Report; Bhat, 1999; Public Hospitals, World Bank note 2002; House of Commons, 2001; Kaiser Foundation, 1999
  34. 34. Focus Public Provision on Rural Primary Care (Korea, Thailand) Initiative: greater involvement of private Impact: Enabled government to sector in urban secondary/ tertiary care focus on rural primary care Hospitals traditionally for-profit private Government traditionally operated a rural institutions, concentrate in urban areas network of primary health posts, health Korea This concentration was increased through centers and maternity centers privatisation in the 1980s: Government was able to strengthen rural - 34 city and local government hospitals care by investing in transformed into private - Korea Health Development Institute that - Share of public hospitals in urban beds designed affordable community services for decreased from 14 to 5 percent rural population Government ownership remained for - New types of health personnel: community health practitioners, village health agents, etc. specialized institutions only: e.g., tuberculosis, psychiatric hospitals Government health spending sustained at high Government created incentives to attract levels: many new health centers constructed investment in the health sector between 1977 and 1986 Thailand In addition, Health Ministry did not to Focus on manpower: intensification of training, 3- invest in additional urban health year compulsory medical service, part-time facilities, leaving the field open to the private practice permitted, deployment of village private sector health volunteers, etc. Later this decision was extended to As a result, Infant Mortality Rate in rural cover hospitals in rural areas Thailand fell from 55 in 1975 to 30 in 1990 Source: Yang, 2001; Health Insurance in Developing Countries, ILO 1990; World Bank discussion paper, 1996
  36. 36. CHALLENGE : Increase Qualified Practitioners In Rural Areas To meet this challenge, some states have created incentives to attract physicians in rural areas Examples States Monthly incentive allowance of Andhra Pradesh Rs. 1,500 as part of “Tribal Health Monetary Service" incentives Contracts with private practitioners to fill Kerala chronic vacancies in government rural facilities Mandatory rural service for doctors who Maharashtra, Orissa and Non- qualify for PG courses (need to serve in Karnataka rural area before start of course) monetary incentives Reservation of select PG seats for in- Kerala service rural doctors
  37. 37. Healthcare - Significant contributor in employment generation Employment in healthcare Revenues as a per cent of GDP Million Per cent 6.5-7.0 +~33% 6.2-7.5 +~66% 5.2 In addition, Healthcare can through account for 4.0 indirect 7% to 11% of employment, incremental healthcare GDP growth sector could from 2001 to create 2-3 2012 million jobs 2001 2012 2001 2012 Source: McKinsey analysis
  38. 38. Healthcare- An opportunity
  39. 39. Healthcare – An opportunity •A population of ~1.2 billion. Fastest emerging healthcare market. •10 fold increase in healthcare requirements in next 10 years •No of doctors to double, nurses triple and number of para-medical staff to increase by 5 times. To maintain current nurse-doctor ratio, the number of students in nursing schools has to triple. •Healthcare spending 6% of GDP compared to 12.4% of GDP in the USA. 60% healthcare expenditure is privately funded •The World Healthcare Market is around USD 2.8 tn if India earns even 1 % of this amount it will generate revenues of USD 28 bn. •Growth of the sector can increase its contribution even further to 6.5-7.2% of GDP and increase employment by at least 2.5 million by 2012 •750,000 beds + investment of Rs.150,000crores needed in the next 10 years •Government and international agencies will only be able to spend Rs.30,000crore over the next 10 years on healthcare infrastructure •Even if the number of medical students were to double, 25 per cent of non-allopathic practitioners will need to be involved in delivering care •Under the demand scenarios private investment required could touch Rs.100,000 to 160,000crore
  40. 40. Healthcare – An opportunity Total number of workers in India - 397 million Unorganised sector - 369 million - Agriculture - 289 mn - Non-Agriculture - 80 mn Organised sector - 28 million Mandatory insurance for organised sector and insurance targeting women alone will improve insurance coverage to over 35% of population - Short term Universal coverage can be reached with mandated insurance in urban areas and high public subsidies in rural areas - Long term
  41. 41. Healthcare – An opportunity Coverage in million 1000 900 500 60 84 60 0 PHI SI ES CI Present 4.8 41 60 60 Present 60 84 60 900 Potential Potential PHI- Private Health Insurance ES- Employer Spend SI – Social Insurance CI- Communal Insurance
  43. 43. Summary • Facilitate investment into healthcare sector by According Infrastructure status Increase FDI cap to 49% now and gradually increase to 74% over a period of 5 years Decrease customs duty levels to Nil in line with countries such as Malaysia, Srilanka (under BOI) • Improve access by  Decrease capital requirements to Rs.30-Rs.50 crore for Healthcare Insurance companies  Make co-payment mandatory to avoid fraudulent practices  Encourage community insurance schemes and make nominal subscriptions
  44. 44. Summary  Make health insurance mandatory for organised sector  Separate role of payer and provider in Social insurance  Privatise ESI hospitals  Promote Public Private Partnerships • Define and ensure minimum quality standards • Make accreditation mandatory for becoming part of network of hospitals • Improve standards & Numbers of medical education / for medical and paramedicals • Encourage and facilitate the integration of medical services and information technology – Health Satellite / Health Network
  46. 46. Public & Private Participation in Healthcare Private Sector Benefits Public Sector Benefits •Quality Healthcare •Widespread reach •Standardised Practices •Easy Implementation & •International Standards Enforcement •Human Resource Welfare •Accessed by Masses •Stopping Brain Drain •Cost Effective •Management systems •Rural – City Networked •PHCs to Tertiary Care Models
  47. 47. PPP Objectives in Healthcare  Make Health affordable and within reach  Provide Health technology like Telemedicine to cut geographical and cost limitations  E-Learning  Implement Health standards
  48. 48. Focus areas of participation Technology is the key enabler for development  Telemedicine made healthcare affordable Insurance key driver in making health affordable  Staggered payments/ co-payments Vs one time costs Qualified people required to run the show  Doctors/ IT/Nurses etc- Train and Empower Healthcare is symbiotic with other industries  Create strong Telecom/ IT/ Road and Power sectors Standardisation is key to simplification  Implement Health Information standards
  49. 49. Successful Public - Private Partnership Models in India •TeleMedicine – Private Health Provider with ISRO •Indian School of Business – Private School on Govt Land •Janmabhoomi – Govt initiative adopted by private organisations •Involvement of DRDO in making Artificial Limbs •House Financing Loans – Govt Subsidy •Farmer‟s Credit Cards – Govt Subsidy for Farmers (UTI/ Andhra Bank)
  50. 50. Successful Healthcare Delivery- Key Enablers  Infrastructure creation at affordable cost  Accessibility  Affordability State role is important in creating successful healthcare delivery model
  51. 51. HURDLES IN RURAL HEALTHCARE  Infrastructure creation- Expensive; Even, if created, specialists not willing to work in rural areas  Accessibility- Modern healthcare facility available only at 300-500 kms away from their homes  Affordability- Poor earn their livelihood income on daily basis; Can’t afford to reach far places to avail healthcare facility Result: Medical facilities never reach rural populace which constitutes 70% of population in India
  52. 52. OVERCOMING THE HURDLES…..  Set up low cost medical facility which will cater to 70% of Insurer illnesses  Establish Telemedicine connectivity  Focus on lower socio-economic groups  Community based social Hospitals Insured insurance  Generation and implementation of the unified delivery systems for proper administration of the health schemes
  53. 53. TAKEAWAYS 1/3  Influence Governments to provide fiscal incentives to Healthcare sector  Encourage research projects  Fund training of manpower & create skilled manpower who could be deployed across borders  Work with local banks and structure financial products to match cashflows of the project  Fund clinical research projects which will subsidise upgradation of technology  Explore the opportunity in traditional medicine in conjunction with Allopathy
  54. 54. TAKEAWAYS 2/3 What Governments can do?  Create internationally competitive basic infrastructure facilities  Provide fiscal incentives to Healthcare sector  Establish broad bandwidth even at rural areas  Concessional lease options in hiring bandwidth  Work on low premium health insurance products  Define and ensure minimum quality standards  Fiscal assistance in training and empowering Human resources
  55. 55. Not only does India have the capacity and capability to significantly raise the standards of healthcare, but to raise it to levels which makes it the global healthcare destination A Healthy India is a Wealthy India