By Karthik Tiruvarur, Assistant Vice President
Out-of-pocket (OOP) payments are the principal source of financing healthcare in India and this fact has important consequences for household living standards. The paper “Catastrophic Payments and Impoverishment Due to Out-of-Pocket Health Spending” by Soumitra Ghosh, published on November 19, 2011 in the Economic and Political Weekly (EPW) explores significant changes in OOP expenses during the 1990s and early 2000s. Using data from the National Sample Survey on consumption expenditure undertaken in 1993-94 and 2004-05, the author measures catastrophic payments and impoverishment due to out-of-pocket payments for healthcare. Based on the author’s analysis of the magnitude, distribution and economic consequences of out-of-pocket payments in India, he concludes that new policies have significantly increased both catastrophic expenditure and impoverishment and that some form of public intervention is needed to alleviate the burden of healthcare spend on low-income households.
In collaboration with Bindu Ananth and Swati Grewal of the IFMR Trust, Dr. Nachiket Mor and Karthik Tiruvarur representing ICTPH wrote a letter to the editor, EPW debating some of the conceptual underpinnings of this paper. In ICTPH’s view, the rationale for government’s involvement in healthcare comes not from the fact that health is a public good or that we have high levels of poverty in India, but from the special nature of healthcare, particularly the informational and coordination challenges outlined in this letter. It is for these reasons that the government has a key role to play in ensuring first-best outcomes for the health system.