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The Concept and Reasons of Health Care Reform in India

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According to Berman, Health sector reform is defined as sustained, purposeful change to improve the efficiency, equity and effectiveness of the health sector. If these involve any 2 of these elements -health financing, expenditure, organization, regulation and consumer behaviour then it can be called as health sector reforms. In India, health sector reforms were a direct outcome of the economic reforms post 1991.

After the economic crisis the Government was not able to efficiently provide healthcare, hence privatisation came into picture. During this period, the social indicators too were poor India had to go for loan under the Structural Adjustment Programme (SAP) of the World Bank. Financing Health Services in Developing Countries’ in 1987 by the World Bank. It called for introduction of user fee, insurance or other risk coverage, effective use of non-government resources and decentralization. health sector reforms in the wake of the fact that despite huge investment, the public health system is not delivering.

Decreased health spending, with decreased public health spending, inefficient expenditure of public spending, poor primary and secondary health care, high out of pocket expenditure, user fees, unregulated private sector and low financial protection all have led to failure of primary health care which has been replaced by market based health sector reforms.

Integrated management of care for sick and malnourished children will require health care systems that can provide accessible high quality services, especially to the poor and disadvantaged. It is broadly agreed that the health sector in many developing countries cannot meet these challenges today without substantial reform. Even huge increases in funding will not suffice, unless and until nations have in place the institutions and infrastructure to use such funds effectively.

To achieve the performance level goals, five control knobs are given: financing, payment, organization, regulation and behavior. Increase in efficiency, quality and access can be achieved by altering these control knobs. 

  • Health financing – mechanisms for raising money that funds the activities in the sector (tax, insurance, premium, direct payment). 
  • Payment or Expenditure – methods of transferring this money to the health care providers (fees, capitations).
  • Organization – mechanisms affecting health care providers, their roles and how they operate within and among themselves (alteration in competition, decentralization and direct control).
  • Regulation – measures affecting the providers, insurance companies and patients. 
  • Behavior – efforts to influence the individual to act in relation to health and health care (patients, providers). 


Financial Protection

There has been a slow increase in financial protection in the form of insurance, be it social, community or private. 10% of the Indian households are covered under any form of insurance. The reason for the slow increase being 93% of population is in unorganized sector and 77% of the population is poor and vulnerable.

Health care financing reforms have to be initiated in order to ensure equitable access and efficient and effective health care. An appropriate mix of private and public health care and financing mechanisms have to be established, so that the two sectors complement to each other, to yield best results. The government must provide subsidies for the poor and disadvantaged groups, to ensure that those who cannot afford to fully finance their own ‘insurance’ are protected. Around 70% of the population pays out of pocket for even primary healthcare. Government spending on health care in most low- and middle-income countries is below what is needed.  Public spending on medical, public health, and family welfare in India is much below what is required. Rashtriya Swastya Bima Yojana a national health insurance scheme for people below the poverty line are the two most important initiatives by the central government. The inadequate level of public health provision has forced the population to seek private health providers.

Reforms in the health sector will have to address the issue of increasing the allocation to health care, focusing on preventative care, ensuring greater access to health care by the poor and significantly improving the productivity of public spending.

Express in demand for health insurance as a significant jump has been observed in the purchase of health insurance.This will improve the penetration of health insurance in India. Only around 25 percent of the population has some form of health insurance to protect them from healthcare expenditure, which drives millions into poverty in India every year. In years to come, deeper penetration of health insurance is expected.


  • Sen, K and Meri Koivusalo (1998) Health Care Reforms and Developing Countries– A Critical Overview,International Journal of Health Planning and Management, 13, 199-215.
  • Berman, P; Reich, M; Hsaio; Roberts (2004) Getting health reform right, OUP, Chp 1, 2 and 6
  • Hemant Deepak Shewade and Arun kumar Aggarwal (2012) Health sector reforms: Concepts, market based reforms and health inequity in India, Educational Research (ISSN: 2141-5161) Vol. 3(2) pp. 118-125

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