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Medicines take lion’s share of personal healthcare spending in India, study finds

The Union and state governments may need to focus on non-medical costs and regulate the drug and diagnostic testing market to help reduce out-of-pocket healthcare expenditure

May 30, 2022 / 10:25 AM IST
Representative image: Reuters

Representative image: Reuters

Medicines are the biggest component of personal spending on healthcare in India, followed by non-medical costs such as travel, food and lodging, according to a report that analysed out-of-pocket health expenditure patterns.

Annual per capita outpatient costs are way higher than annual inpatient costs, said the researchers associated with the government think-tank Niti Aayog, Harvard University, and the Indian Institute of Population Sciences in Mumbai, who conducted the largest study on components of out-of-pocket health expenses in India.

The analysis titled Components of Out-of-Pocket Expenditure and Their Relative Contribution to Economic Burden of Diseases in India was published in the Journal of the American Medical Associaton this month.

The study analysed expenditure patterns by 43,781 inpatients and 8,914 outpatients across rural and urban areas and public and private hospitals.

About 63 percent of the total healthcare spending in India is incurred by way of out-of-pocket expenses by individuals. Even as the government increases focus on universal health coverage, total healthcare spending in India was about 2.1 per cent of the country’s GDP in FY22, amounting to Rs 4.72 lakh crore.

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Insurance covers about 12 percent of the total healthcare expenditure in India.

Cost break-up

Out-of-pocket expenses per capita were estimated at Rs 21,385 for inpatients and Rs 27,913 for outpatient services, marking a difference of more than 26 percent.

The analysis found that medicines form the biggest chunk of out-of-pocket expenses – a mean of 29.1 percent among inpatients and 60.3 percent for outpatients.

Doctor consultation charges were a mean of 15.3 percent among inpatients and 12.4 percent in case of outpatients. Diagnostic tests accounted for a mean of 12.3 percent for inpatients and 9.2 percent for outpatient services.

Non-medical costs accounted for a mean of 23.6 percent among inpatients and 14.6 percent for outpatients.

The mean share of out-of-pocket expenses on doctor consultations and diagnostic tests increased with the socioeconomic status of the patients.

The study showed that the mean doctor consultation charges were 12-fold higher in private hospitals than in public hospitals and seven-fold higher in private clinics for outpatient services. They were 24-fold higher in private hospitals compared with public hospitals for inpatient services.

Non-medical costs were similar across inpatient and outpatient services.

Regulation needed

The researchers suggested that the Union and state governments may need to focus on non-medical costs and regulate the drug and diagnostic testing market.

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SV Subramanian, professor of population health and geography at Harvard University and lead author of the report, told Moneycontrol that after identifying the major reasons for medical travel within the country, the government can provide basic care up to the last mile to contain medical migration or travel and thus reduce personal expenditure and foregone care (some people avoid spending on healthcare due to associated travel).

“Meanwhile, affordable stay facilities near district hospitals can be provided along with affordable food (via hospital canteens) and travel allowance for vulnerable populations can help contain non-medical costs,” he suggested.

As medicines are the highest contributor of personal spending, government initiatives to make them more affordable may be steps in the right direction, he said.

These include programmes such as the Pradhan Mantri Bhartiya Janaushadhi Pariyojana, which makes quality generic medicines available at affordable prices to all, the Pharma Sahi Daam, an online tool to check and compare prices of medicines, and Affordable Medicines & Reliable Implants for Treatment (AMRIT), to reduce the expenditure of patients on treatment of heart and cancer diseases, he said.

According to Subramanian, it may be important to understand whether the increase in doctor consultations and diagnostic testing costs with socio-economic status is a result of overpricing or wasteful expenditure.

Complex issues

Clinician and health researcher Dr Rajeev Jayadevan from Kerala, who is not associated with the study, said the findings highlight some of the major issues plaguing India’s healthcare delivery system.

“We understand, for instance, that polypharmacy (use of multiple medicines in a patient) is a rampant practice in India and there are many factors driving it,” he said.

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“While rational prescription of drugs should be taught with greater emphasis in medical colleges, sometimes patients are also not happy when they are not advised a number of drugs.”

Jayadevan said the government has done well to open Janaushadhi stores across the country, but there should be more transparency around the generic medicines sold there.

“That will give doctors more confidence to prescribe the drugs available at such stores,” he said.

On the issue of over-diagnosis, Jayadevan said that increasing litigation against doctors was one of the factors responsible for this.

“Now a doctor does not want to take a chance and therefore orders many investigations as necessary to rule out any specific possibility of a disease,” he said.

Almost 70 percent of the healthcare delivery in the country is through the private sector, which is also responsible for rising medical costs, Jayadevan said, adding that private hospitals and clinics do need to recover costs in the view of rising medical inflation, all of which ultimately falls on patients.

“A key solution to minimise out-of-pocket expenses on health is to focus on primary and preventive healthcare in India and raise government spending on health substantially,” Jayadevan emphasised.
Sumi Sukanya Dutta
first published: May 30, 2022 10:25 am