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India’s Proposed Universal Health Coverage Policy: Evidence for Age Structure Transition Effect and Fiscal Sustainability

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Abstract

Background

India’s High Level Expert Group on Universal Health Coverage in 2011 recommended a universal, public-funded and national health coverage policy. As a plausible forward-looking macroeconomic reform in the health sector, this policy proposal on universal health coverage (UHC) needs to be evaluated for age structure transition effect and fiscal sustainability to strengthen its current design and future implementation.

Objective

Macroeconomic analyses of the long-term implications of age structure transition and fiscal sustainability on India’s proposed UHC policy.

Methods

A new measure of age-specific UHC is developed by combining the age profile of public and private health consumption expenditure by using the National Transfer Accounts methodology. Different projections of age-specific public health expenditure are calculated over the period 2005–2100 to account for the age structure transition effect. The projections include changes in: (1) levels of the expenditure as gross domestic product grows, (2) levels and shape of the expenditure as gross domestic product grows and expenditure converges to that of developed countries (or convergence scenario) based on the Lee–Carter model of forecasting mortality rates, and (3) levels of the expenditure as India moves toward a UHC policy. Fiscal sustainability under each health expenditure projection is determined by using the measures of generational imbalance and sustainability gap in the Generational Accounting methodology.

Results

Public health expenditure is marked by age specificities and the elderly population is costlier to support for their healthcare needs in the future. Given the discount and productivity growth rates, the proposed UHC is not fiscally sustainable under India’s current fiscal policies except for the convergence scenario. However, if the income elasticity of public expenditure on social welfare and health expenditure is less than one, fiscal sustainability of the UHC policy is attainable in all scenarios of projected public health expenditures. These new results strengthen the proposed UHC policy by accounting for age structure transition effect and justifying its sustainability within the framework of India’s current fiscal policies.

Conclusion

The age structure transition effect is important to incorporate the age-specific cost and benefit of the proposed UHC policy, especially as India moves toward an ageing society. Fiscal sustainability is essential to ensure that the proposed UHC is implementable on a long-term basis and within the framework of current fiscal policies.

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Fig. 1

Source: author’s calculation based on Census of India reports from 1961 to 2011 and the United Nations [21] from 2021

Fig. 2

Source: author’s calculations based on India’s National Accounts Statistics, various issues

Fig. 3

Source: author’s calculations

Fig. 4

Source: author’s calculations

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Notes

  1. In fact, the needs for a UHC for India have long been debated. See, for instance, Sen [18] for a description of the evolution of proposals for UHC in India. The topic is of current policy debates as reflected in the leading newspaper articles, such as Mor and Kalita [10]. At the international level, the World Health Report 2013 [22] provides a detailed review of studies and analyses of key issues in UHC across the world.

  2. In addition, Stabile and Thomson [19] provide an excellent international review of the changing role of government in financing healthcare for six countries (Australia, Canada, England, France, Germany, Switzerland and USA). Though the review is not focused on fiscal sustainability issues, it provides useful lessons from the experiences of the select Organization for Economic Cooperation and Development countries for the formulation of a future public-funded UHC policy in developing countries such as India.

  3. Fiscal sustainability is important for India because the fiscal condition of the general government is already poor owing to the persistence of fiscal deficit and its debt financing. For instance, the actual combined gross fiscal deficit of the Union and State governments as a percentage of GDP has varied from 9.2 % in 2000–2001, 7.2 % in 2004–2005, 8.3 % in 2008–2009 and 7.4 % in 2012–2013. [Reserve Bank of India, accessed on 4 August 2015 at http://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics].

  4. These figures are quoted from the World Health Organization’s World Health Statistics 2008 in [5].

  5. A description of these public insurance schemes is available in [17].

  6. These features coincide with what Nobel laureate A.K. Sen said in an interview with The Hindu newspaper [Friday, January 8, 2016: p.15]: “India is the only country which is trying to get universal health care through the private sector”.

  7. Limitations of this approach to GA are analysed by Bonin and Patxot [2] and, hence, our results are obviously qualified by those limitations including a lack of behavioural and policy dynamics.

  8. A general discussion on theory and practice of fiscal sustainability is given by Burnside [3].

  9. It should be emphasized that, unlike GA, NTA deals with both the public and private sectors. This difference, among others, is evident in the NTA Flow Account Identity (Eq. 1) and inter-temporal budget constraint in GA (Eq. 2). Thus, NTA’s public sector profiles of inflows and outflows are used in GA profiles of transfers and payments. A notable exception of this article is the use of an NTA-based age profile of private health consumption expenditure to calculate the age profile for UHC.

  10. Since 2004–2005, the discount rate (or average interest rate on government debt) has declined. Hence, a robustness check on the discount rate is calculated if the rate is lower than 8.13 % (i.e., at 8 and 7.5 %).

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Acknowledgements

An early version of this article was presented for the International Symposium on Demographic Change and Policy Response (13–14 November 2014, Beijing, China). The author is grateful to Profs. Ronald Lee, Andrew Mason, Young Jun Chun and Robert Gal, and Drs. Carl Mason and Tim Miller for research guidance and technical help; the Centre for Economics and Demography of Ageing (University of California, Berkeley) and the East West Center (Hawaii) for full financial support for participation in the conference; the Institute for Social and Economic Change (Bengaluru, India) for research support; and two anonymous referees and the Editor-in-Chief of this journal for the constructive and insightful comments and suggestions.

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Correspondence to Muttur Ranganathan Narayana.

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Narayana, M.R. India’s Proposed Universal Health Coverage Policy: Evidence for Age Structure Transition Effect and Fiscal Sustainability. Appl Health Econ Health Policy 14, 673–690 (2016). https://doi.org/10.1007/s40258-016-0270-1

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