No more entitlements

However worthy the cause, 2012 is not the time

There is little doubt that India’s public health spending is disgracefully low, at just over one per cent of gross domestic product. Given that a large number of Indians are positioned unstably just above or just below the poverty line, the consequence of catastrophic health failure and high healthcare costs is that entire families are frequently sent back, highly indebted, to subsistence levels of consumption. Like education, accessible quality healthcare is indeed an essential ingredient of a stable, decent society with built-in social mobility. As India grows, it is essential to put into place a sensible universal healthcare provision, which should avoid the traps revealed by both European welfare states and American laissez-faire. Yet, as India prepares for a 2012-13 Budget that must prioritise the control and reform of government spending, sensible voices must be raised against creating another badly designed entitlement system.

The Planning Commission, in the process of drafting the 12th Five-Year Plan, has considered two different road maps from two different committees. One, chaired by Srinath Reddy of the Public Health Foundation of India, has recommended an entitlement-based system with massive increases in government funding for hospitals at every level. Another has suggested the lead be taken by private healthcare companies. Neither idea is satisfactory. A system in which private healthcare companies are reimbursed by public funds for treatment is open to enormous amounts of abuse, which India’s regulatory capacity is incapable of controlling. And the United Progressive Alliance’s preferred approach – legislating an entitlement, ramping up expenditure, and completely ignoring the quality of outcomes – has been demonstrated to be an expensive, disappointing failure. As it is, the poorly designed and conceived food security Bill is hanging like a Damoclean sword over the government’s finances.

The crucial point, one that the Congress leadership, the finance ministry and the Planning Commission surely realise, is that India’s government is strapped for cash. If India is to indeed put into place a decent welfare system – especially quality, affordable choices in healthcare and education – then it needs to not just grow its economy further, but also completely restructure how the government pays for and provides services. There are hard choices to be made. Every idea that seems like a good one cannot be afforded, at least not simultaneously. Most importantly, any idea that sets up an entitlement should be avoided altogether at this juncture. There are fears that India’s growth has moved to a lower path. Government revenue may have become correspondingly less buoyant. The experience of the West should teach India’s leaders that welfare entitlements, once introduced, prove impossible to remove even in emergencies. And the experience of the recent elections should teach them that the mere introduction of entitlements is not politically helpful, especially when attention is not paid to governance reform to allow citizens control and choice over how those entitlements are realised. India must indeed improve its healthcare system and should move towards universalisation. But it cannot implement or promise anything until it fixes its finances and its service delivery.