Assignment-II: Comparison study of UK, USA and Indian Healthcare System:

Healthcare System in UK:

Healthcare in the United Kingdom is a devolved matter, that is England, Northern Ireland, Scotland and Wales each have their own systems of private and publicly-funded healthcare, together with alternative, holistic and complementary treatments. Each country having different policies and priorities which has resulted in a variety of differences existing between the systems. But, each country provides public healthcare to all UK permanent residents that is free at the point of need, being paid for from general taxation. In addition, each also has a private healthcare sector which is considerably smaller than its public equivalent, with provision of private healthcare acquired by means of private health insurance, funded as part of an employer funded healthcare scheme or paid directly by the customer, though provision can be restricted for those with conditions such as AIDS/HIV. Overall, around 8.4 per cent of the UK's gross domestic product is spent on healthcare. Most healthcare services in England is provided by the National Health Service (NHS), England's publicly funded healthcare system, which accounts for most of the Department of Health's budget (£98.6 billion in 2008-9). The actual delivery of health care services is managed by ten Strategic Health Authorities and, below this, locally accountable trusts and other bodies. Social care services are a shared responsibility with the local NHS and the local government.

Each NHS system uses General Practitioners (GPs) to provide primary healthcare and to make referrals to further services as necessary. Hospitals then provide more specialist services, including care for patients with psychiatric illnesses, as well as direct access to Accident and Emergency (A&E) departments. Pharmacies (other than those within hospitals) are privately owned but have contracts with the relevant health service to supply prescription drugs.

Each public healthcare system also provides free ambulance services for emergencies, when patients need the specialist transport only available from ambulance crews or when patients are not fit to travel home by public transport. These services are generally supplemented when necessary by the voluntary ambulance services. In addition, patient transport services by air are provided by the Scottish Ambulance Service in Scotland and elsewhere by county or regional air ambulance trusts throughout England and Wales.

Each NHS system also provides dental services through private dental practices and dentists can only charge NHS patients at the set rates for each country. Patients opting to be treated privately do not receive any NHS funding for the treatment.

Hence, coverage is universal. All those ‘ordinarily resident’ in the United Kingdom are entitled to health care that is largely free at the point of use.

Coverage:Services: Publicly-funded coverage: the National Health Service (NHS) covers preventative services; inpatient and outpatient (ambulatory) hospital (specialist) care; physician (general practitioner) services; inpatient and outpatient drugs; dental care; mental health care; learning disabilities; and rehabilitation.

Cost-sharing: There are relatively few cost-sharing arrangements for publicly-covered services. Drugs prescribed by general practitioners are subject to a co-payment (£6.85 per prescription; $13.79), but about 88% of prescriptions are exempt from charges. Dentistry services are subject to co-payments of up to about £200 per year (about $400), although there is difficulty in obtaining NHS dental services in some areas. Out-of-pocket payments accounted for 11.9% of total expenditure on health. Most costs are met from the public purse. There are measures in place to alleviate costs where these may have an undue impact on certain patient groups. The following are exempt from prescription drug co-payments: children under the age of 16 years and those in full-time education aged 16, 17 or 18; people aged 60 years or over; people with low income; pregnant women and those having had a baby in the last 12 months; and people with certain medical conditions and disabilities. There are discounts through pre-payment certificates for people who use a large amount of prescription drugs. Transport costs to and from provider sites are also covered for people with low income.

Delivery system:

Physicians: General practitioners (GPs) are usually the first point of contact for patients and act as gatekeepers for access to secondary care services. Most GPs are paid directly by primary care trusts (PCTs) through a combination of methods: salary, capitation and fee-for-service. Private providers of GP services set their own fee-for-service rates but are not generally reimbursed by the public system.

Hospitals: These are organized as NHS trusts directly responsible to the Department of Health. More recently, foundation trusts have been established as semi-autonomous, self-governing public trusts. Both contract with PCTs for the provision of services to local populations. Public funds have always been used to purchase some care from the private sector, but since 2003 some routine elective surgery has been procured for NHS patients from purpose-built treatment centers owned and staffed by private sector providers. Consultants (specialists) work mainly in NHS hospitals but may supplement their salary by treating private patients.

Government: Responsibility for health legislation and general policy matters rests with Parliament at Westminster. The NHS is administered by the NHS Executive and the Department of Health, and locally is provided through a series of contracts between commissioners of health care services (PCTs) and providers (hospital trusts, GPs, independent providers). PCTs control

around 85% of the NHS budget (allocated to them based on a risk-adjusted capitation formula) and are responsible for ensuring the provision of primary and community services for their local populations.

Private insurance funds: Private insurers provide their subscribers with health care at a range of private and NHS hospitals. Patients generally can choose from a number of health care providers.

Ensuring quality of care:

Quality of care is a key focus of the NHS. A Department of Health objective in 2007 was to enhance the quality and safety of health and social care services. Quality issues are addressed in a range of ways including:

Regulatory bodies: A number of bodies monitor and assess the quality of health services provided by public and private providers. This involves regular assessment of all providers, investigation of individual providers where an issue has been drawn to the attention of the regulatory body and consideration of key areas of provision in order to recommend best practice.

The three bodies primarily responsible for regulation in England (the Healthcare Commission, the Commission for Social Care Inspection and the Mental Health Act Commission)

Funding:

National Health Service (NHS): The NHS accounts for 86% of total health expenditure. It is mainly funded by general taxation (76%), but also by national insurance contributions (19%) and user charges (5%). Apart from the income the NHS receives for the provision of prescription drugs and dentistry services to the general population, there is some income from other fees and charges, particularly to private patients who use NHS services.

Private health insurance: A mix of for-profit and not-for-profit insurers provides supplementary private health insurance. Private insurance offers choice of specialists, avoidance of queues for elective surgery and higher standards of comfort and privacy than the NHS. It covers 12% of the population and accounted for 1% of total health expenditure in 2004.

Others: People also pay directly out-of-pocket for some services – for example, care in the private sector. Direct out-of-pocket payments account for over 90% of total private expenditure on health.

Costs control:

The government sets the budget for the NHS on a three-year cycle. To control utilization and costs, the government sets a capped overall budget for PCTs. NHS trusts and PCTs are expected to achieve financial balance each year. The centralized administrative system tends to result in lower overhead costs. Other mechanisms that contribute to improved value for money include arrangements for the systematic appraisal of new technologies through the National Institute for Health and Clinical Excellence (NICE).

Healthcare System in USA:

As with all other countries, there are both private and public insurers in the U.S. health care system. What is unique about the U.S. system in the world is the dominance of the private element over the public element.

In 2003, 62% of non-elderly Americans received private employer-sponsored insurance, and 5% purchased insurance on the private non group (individual) market. 15% were enrolled in public insurance programs like Medicaid, and 18% were uninsured. Elderly individuals aged 65 or over are almost uniformly enrolled in Medicare.

Public Health Insurance:

Medicare: Medicare is a federal program that covers individuals aged 65 and over, as well as some disabled individuals. Medicare is a single-payer program administered by the government; single-payer refers to the idea that there is only one entity (the government) performing the insurance function of reimbursement. Medicare is financed by federal income taxes, a payroll tax shared by employers and employees, and individual enrollee premiums (for parts B and D). Medicare Part A covers hospital services, Medicare Part B covers physician services, and Medicare Part D offers a prescription drug benefit. Medicare Part C refers to Medicare Advantage – HMO’s that administer Medicare benefits.

There are many gaps in Medicare coverage, including incomplete coverage for skilled nursing facilities, incomplete preventive care coverage, and no coverage for dental, hearing, or vision care. Because of this, the vast majority of enrollees obtain supplemental insurance. Overall, seniors pay about 22% of their income for health care costs despite their Medicare coverage.

Medicaid: Medicaid is a program designed for the low-income and disabled. By federal law, states must cover very poor pregnant women, children, elderly, disabled, and parents. Childless adults are not covered, and many poor individuals make too much to qualify for Medicaid. States have the option of expanding eligibility if they so choose. For example, states can choose to increase income eligibility levels. Administration: The states and the District of Columbia are responsible for administering the Medicaid program; as such, there are effectively fifty-one different Medicaid programs in the country. Medicaid is financed jointly by the states and federal government through taxes. Every dollar that a state spends on Medicaid is matched by the federal government at least 100%. In poorer states, the federal government matches each dollar more than 100%. Overall, the federal government pays for 57% of Medicaid costs. Medicaid offers a fairly comprehensive set of benefits, including prescription drugs. Despite this, many enrollees have difficulty finding providers that accept Medicaid due to its low reimbursement rate.

Other public systems: S-CHIP: The State Children’s Health Insurance Program (S-CHIP) was designed in 1997 to cover children whose families make too much money to qualify for Medicaid but make too little to purchase private health insurance. S-CHIP and Medicaid often

share similar administrative and financing structures. VA: The Veteran’s Administration is a federally administered program for veterans of the military. Health care is delivered in government-owned VA hospitals and clinics. The VA is funded by taxpayer dollars and generally offers extremely affordable (if not free) care to veterans.

Private Health Insurance:

Employer-sponsored insurance: Employer-sponsored insurance represents the main way in which Americans receive health insurance. Employers provide health insurance as part of the benefits package for employees. Insurance plans are administered by private companies, both for-profit (e.g. Aetna, Cigna) and non-for-profit (e.g. Blue Cross/Blue Shield). A special case is represented by companies that are “self-insured” – that is, they pay for all health care costs incurred by employees directly. In this case, the company contracts with a third party to administer the health insurance plan. Self-insured companies tend to be larger companies such as General Motors. Employer-sponsored insurance is financed both through employers (who usually pay the majority of the premium) and employees (who pay the remainder of the premium). Benefits vary widely with the specific health insurance plan. Some plans cover prescription drugs, while others do not. The degree of cost- sharing (co-pays and deductibles) varies considerably.

Private non-group (individual market): The individual market covers part of the population that is self- employed or retired. In addition, it covers some people who are unable to obtain insurance through their employer. In contrast to the group market (employment-based insurance), the individual market allows health insurance companies to deny people coverage based on pre-existing conditions. The plans are administered by private insurance companies. Individuals pay an insurance premium out-of-pocket for coverage. Risk in the individual market depends only on the health status of the individual, in contrast to the group market, in which risk is spread out among multiple individuals. As such, low-risk, healthy patients will have a low premium, whereas the opposite is true for high-risk, sick patients. Benefits vary widely with the specific health insurance plan.

Funding:

The financing of health care centers around two streams of money: the collection of money for health care (money going in), and the reimbursement of health service providers for health care (money going out). In the United States, the responsibility for these two functions is shared by private insurance companies as well as the government, both of which are known in policy terms as “payers.” As such, the United States can be thought of as a “multi-payer” system.

Individuals and businesses:

Taxes: Both individuals and businesses pay income taxes to the government. In addition, there is a payroll tax on employers and employees to finance Medicare.

Premiums: Businesses pay all or most of the premium for employer-based insurance for employees, and employees pay the remainder. On the individual market, individuals pay for all premiums out of pocket. Employer-based insurance premiums and individual insurance premiums are collected by private insurers.

Direct or out-of-pocket payments: This is a direct payment to a provider for health care services (e.g. a co-payment).

Government:

Medicare, Medicaid, S-CHIP, and the VA: The government uses money generated from taxes to reimburse providers who take care of patients enrolled in these programs.

Public employees’ premiums: The government also uses tax dollars to pay private insurers a health insurance premium for federal employees and other public employees.

Tax subsidy: There is a tax subsidy of employer-based insurance that represents a major cost to the government. Employees receive health insurance benefits as tax-free compensation, and employers are able to deduct health insurance benefits as a cost of doing business. [Since employers are only taxed on profits, defined as any income above the cost of doing business, being able to deduct health insurance benefits as a cost of doing business is a tax subsidy for employers].

Private insurers:

Private insurers accept premiums from individuals, businesses, and the government. In turn, they reimburse providers for taking care of patients with private insurance.

Health service providers:

Providers (doctors, allied health professionals, hospitals, and other health care facilities) take

care of individuals. They are reimbursed for their services by private insurers and the government.

Health spending and financing:

The United States spent 15% of its GDP on health care in 2003, the highest percentage in the OECD (an organization of industrialized countries). The average percentage of GDP spent on health care in OECD countries was 8.6%. The United States also spends more on health care per capita than any other OECD country. In 2003, total health spending per capita was $5,635 US dollars (adjusted for purchasing power parity), more than twice the OECD average of $2,307 US dollars. Between 1998 and 2003, health spending per capita in the United States increased in real terms by 4.6% per year on average, a growth rate comparable to the OECD average of 4.5% per year.

The public sector is the main source of health funding in all OECD countries, except for the United States, Mexico and Korea. In the United States, 44% of health spending is funded by government revenues, well below the average of 72% in OECD countries.

In the United States, private insurance accounts for 37% of total health spending, by far the largest share among OECD countries. Canada, France, and the Netherlands also have a relatively large share of funding coming from private insurance (more than 10%).

Healthcare System in India:

Healthcare in India features a universal health care system run by the constituent states and territories of India. The Constitution charges every state with "raising the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties". The National Health Policy was endorsed by the Parliament of India in 1983 and updated in 2002.

The healthcare industry includes medical care providers, physicians, specialist clinics, nursing homes, hospitals, medical diagnostic centers and pathology laboratories. In terms of revenue and employment, healthcare is one of India’s largest service-sector industries. During the 1990s, Indian healthcare grew at a compound annual rate of 16%. Today the total value of the sector is more than $34 billion. This translates to $34 per capita, or roughly 6% of GDP. By the end of 2012, India’s healthcare sector is projected to grow to nearly $40 billion.

The Indian healthcare sector constitutes of the following:

• Medical care providers: physicians, specialist clinics, nursing homes and hospitals; • Diagnostic service centers and pathology laboratories; • Medical equipment manufacturers; • Contract research organizations (CRO's), pharmaceutical manufacturers; • Third party support service providers (catering, laundry).

Hospitals serve an important function in India's healthcare system. They provide in-patient and out-patient services and also support the training of health workers and research. Indian hospitals can be broadly classified as public hospitals, private and not-for-profit hospitals. Corporate hospital chains that provide tertiary healthcare services in large towns and cities have also been established. The public healthcare system consists of healthcare facilities run by the central and state government which provide services free of cost or at subsidized rates to low income group in rural and urban areas.

Healthcare spending in India accounts for over 5 per cent of the country's GDP. Out of this, the public spending in percentage is around 1 per cent of GDP. The presence of public health care is not only weak but also under-utilized and inefficient. Meanwhile, private sector is quite dominant in the healthcare sector. Around 80 percent of total spending on healthcare in India comes from the private sector. Inadequate public investment in health infrastructure has given an opportunity to private hospitals to capture a larger share of the market. In addition the demand for hospital services has been increasing due to the rise in lifestyle related diseases.

Initially the government imposed high custom duty on imported medical equipment making it difficult for private entrepreneurs to set up hospitals. But in post liberalization the duties have come down and some life saving medicines and equipments can be imported duty free. Moreover, the introduction of product patents in India is expected to boost the industry by encouraging multinational companies to launch specialized life -saving drugs.

Regulatory Framework:

Ministry of Health and Family Welfare (MoHFW): The Union Ministry of Health and Family Welfare (MoHFW) is responsible for implementation of national programmes, sponsored schemes and technical assistance relating to the Indian healthcare industry. The following departments come under the Ministry:

Department of Health: It looks after the following activities:

• Health related activities, including various immunization campaigns;• Control over various health bodies including National Aids Control Organization

(NACO), National Health Programme, Medical Education & Training, and International Cooperation in relation to health;

• Administers the Hospital Services Consultancy Corporation.

Department of Family & Welfare: This department offers the following services:

• Maternal and Child Health Services; Information, Education and Communication; • Rural Health Services, Non-Governmental Organisations and Technical Operations. • Policy Formulation, Statistics, Planning, Autonomous Bodies and Subordinate Offices; • Supply of Contraceptives; International Assistance for Family Welfare and Urban Health

Services; • Administration and Finance for the Departments of Health, Family Welfare.

Department of AAYUSH: This department undertakes the following activities:

• Upgrade the educational standards in the Indian Systems of Medicines and Homoeopathy colleges in the country;

• Strengthen existing research institutions and ensure a time-bound research programme on identified diseases for which these systems have an effective treatment;

• Draw up schemes for promotion, cultivation and regeneration of medicinal plants used in these systems;

• Evolve Pharmacopoeial standards for Indian Systems of Medicine and Homoeopathy drugs.

Autonomous Institutions conducting Research and Development:

The following autonomous institutions under the Ministry of Health and Family Welfare conduct research in various specific areas:

• Indian Council of Medical Research (ICMR) • Indian Medical Association (IMA) • Central Drug Research Institute (CDRI)

National Programmes and Schemes:

National Rural Health Mission: This mission was launched in April 2005 by the Government of India to fulfill the Government’s commitment to meet people’s aspirations for better health and access to healthcare services. NRHM’s goals include the training of 250,000 women volunteers designated as Accredited Social Health Activists (ASHAs) over the next three years across 18 states with weak rural health infrastructure.

National Health Policy-2002: The National Health Policy 2002 focuses on the need for enhanced funding and organizational restructuring of the national public health initiatives in order to facilitate more equitable access to health facilities. The following are the other areas of its focus:

• Gradual convergence of health under a single field administration and emphasis on implementation of programmes through local self- government institutions;

• Identification of specific programmes targeted at women’s health and strengthening of food and drug administration, in terms of both laboratory facilities and technical expertise;

• Focus on those diseases that are principally contributing to the disease burden - TB, Malaria and Blindness from the category of historical diseases and HIV/AIDS from the category of newly emerging diseases;

• Greater contribution from the Central Budget for the delivery of public health services at the state level.

Other National Health Programmes:

• National Vector Borne Disease Control Programme (NVBDCP) • National Filaria Control Programme • National Leprosy Eradication Programme • Revised National TB Control Programme • National Programme for Control of Blindness • National Iodine Deficiency Disorders Control Programme • National Mental Health Programme • National Aids Control Programme • National Cancer Control Programme • Universal Immunization Programme • National Programme for Prevention and Control of Deafness• Pilot Programme on Prevention and Control of Diabetes, CVD and Stroke• National Tobacco Control Programme

Key Areas of Opportunity in the Healthcare Segment:

The following are the key areas of opportunity within the Indian Healthcare Segment:

Medical Tourism:

Indian hospitals are fast becoming the first choice for an increasing number of foreign tourists. The medical tourism market in India is worth US$ 333 million, with about 100,000 foreign patients coming in every year. It is estimated that revenues from this segment could touch US$ 2.2 billion by 2012, from the current figure of US$ 333 million.

Over 272,000 tourists traveled for medical treatment in 2007 contributing USD 656 million in 2007. Moreover, Patents are expected to save 60% - 95% of the total treatment costs in India. Government has created special visas for medical tourism.

India’s capability to provide quality healthcare at a greatly reduced cost is acknowledged worldwide. The following is a rough comparison of treatment charges in the United States and India:

•A liver transplant costs US$ 500,000 in the US : in India it costs US$ 40,000. •An MRI of the wrist costs just US$ 155 in India while the same can cost US$ 1600 in

Hong Kong. •An open-hear procedure at a top hospital in the country would cost a patient around US$

5000-7000 as against US$ 50,000 abroad. •Neurosurgery in the country costs around US$ 8,000 as compared with US$ 29,000 in the

US. •A root canal procedure by a dentist in India would cost about US$ 20 as against US$ 100

in the US.

Medical infrastructure:

As per the current statistics bed per thousand population ratio for India stands at 1.03 as against an average 4.3 of comparable countries like China, Korea and Thailand.

In spite of the phenomenal growth in the healthcare infrastructure, India is likely to reach a bed to thousand-population ratio of 1.85 and in a best-case scenario, a ratio of 2 by the end of 2012.

Telemedicine:

This is another opportunity which allows even the interiors to access quality healthcare and at the same time significantly improve the productivity of medical personnel. It is one such innovative technology, if used effectively can double utilization of scarce human resources. Only 25% of India’s specialist physicians reside in semi-urban areas, and a mere 3 % live in rural areas. As a result, rural areas, with a population approaching 700 million, continue to be deprived of proper healthcare facilities. Telemedicine provides a solution in such a scenario by offering remote diagnosis, monitoring and treatment of patients via videoconferencing or the Internet. It is a fast-emerging trend in India, supported by exponential growth in the country’s information and communications technology (ICT) sector, and plummeting telecom costs. Several major private hospitals have adopted telemedicine services, and a number of hospitals have developed public-private partnerships.

Today there are approximately 120 telemedicine centers throughout India. The government has also made a major commitment to the growth of telemedicine. The Indian Space Research Organization (ISRO) plans to establish 100 telemedicine centers across the country. The government also is reducing import tariffs on infrastructure equipment. And while India has yet to pass legislation on telemedicine related issues, the Ministry of Information Technology has developed “Recommended Guidelines & Standards for Practice of Telemedicine in India,” with the goal of standardizing digital communication in telemedicine.

Medical equipment and IT:

Medical equipment forms another promising opportunity within healthcare. Currently over 65% of the medical equipments are imported. Engineering excellence, cost-effective labor, increasing emphasis on intellectual property rights and most importantly a fast growing domestic market makes India an ideal manufacturing base.

Investments into the medical and surgical instruments segment amounted to US$ 115.29 million over the period August 1991 to April 2007. A recent study has predicted 15-20 per cent growth for the Indian medical equipment market and estimated market size to be about US$ 5 billion by the end of 2012.

Hospitals have realized that information technology (IT) can be an effective tool towards efficient systems. India has the fastest growing healthcare IT market in Asia, with an expected growth rate of 22 per cent, followed closely by China and Vietnam.

The Indian healthcare technology market is poised to be worth more than US$ 254 million by the end of 2012.

Health insurance:

With less than 10 per cent of the Indian population having some sort of health insurance, the potential market for health insurance is huge. The Indian health insurance business is fast growing at 50 per cent and is expected to continue growing at this pace. The sector is projected to grow to US$ 5.75 billion by 2013.

The Insurance Regulatory and Development Authority (IRDA) has eliminated tariffs on general insurance as of January 1, 2007. This move is expected to drive additional growth of private insurance products.

Clinical trials:

In recent years, India has become an attractive market for clinical testing. One reason is that in November 2004, the federal government amended Schedule Y of the Drugs and Cosmetics Act to make the rules on clinical trials more consistent with international practice. In addition, in January 2005 India became compliant with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and formally recognized product patents. This triggered growth in Indian clinical trial activity by contract research organizations and by multinational corporations.

Government taxation incentives are further boosting R&D in India. As a market for clinical testing, India holds other attractions as well. According to a study the huge patient population offers vast genetic diversity, making the country “an ideal site for clinical trials.”

The Indian clinical trials market, currently estimated at $120 million, is expected to reach $1 billion by 2010. To achieve that level of growth, India will have to address a lack of skilled workers, high wage inflation, and inadequate infrastructure.

Clinical trials account for over 40% of the costs of developing a new drug, and as per estimates a standard drug could be tested in India for as little as $90 million—60% of the cost of testing in the US.

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Prepared By: Arnab Chatterjee.

PGDM-TPS-19th Batch

SSIM, Secunderabad.