Friday, September 04, 2009

The India model

In the current health care debate a lot of attention has been given to the approaches employed by other countries, most notably Canada, the U.K., France and the Netherlands. But based on this Salon article, perhaps the country we ought to more closely study is India, which has taken a much more free market approach.

Aruna Viswanatha, who lived as an expat in India for a year and a half, describes the system:

The Indian healthcare system is an anarchic hodgepodge, with little insurance, little regulation and a range of services offered by hundreds of government-run, trust-run and corporate hospitals. The care it produced for me was fast, effective, courteous and cheaper than American medicine, even when adjusted for the lower cost of living. But that was the care it produced for me, a middle-class woman in the big city. As America considers healthcare reform, the Indian system is a testament to both the triumphs and the pitfalls of letting the free market heal people.

Reading the article, however, one gets the impression India's approach is a pretty big success, with the reference to pitfalls likely just a sop to Salon's leftist sensibilities.

Viswanatha begins by describing her experience after becoming violently ill with a stomach ailment:
It was about 9:30 in the morning. My friend, who works for an outsourcing firm, called a gastroenterologist -- not a general practitioner but a specialist -- and set up an appointment for 10 a.m. We drove to the hospital, a mile away. It looked brand-new; the floors were shiny and everything glistened. The staff was courteous and the whole place was quiet. The doctor called me in at 10:02. He diagnosed the problem as a bacterial one, gave me a list of what to eat and prescribed a course of antibiotics. The pharmacy counter where I could pick up the drugs was just outside his office. The cost to see the doctor? $6. The pharmacy bill was about $1. Total cost, $7, with no insurance company involvement whatsoever.

Before I left New York, I had spent $20 just on a copay to visit a doctor and get a blood test done, another $20 copay to pick up the test results, and a third $20 installment for a tetanus shot. That was $60, plus whatever my insurance company paid, just so I could get a clean bill of health.

A couple of weeks after my first encounter with an Indian doctor, I had another bout of stomach problems. This time, it was probably a glass of watermelon juice that did me in, and the next morning, I couldn't even keep water down. We called the same doctor on his cellphone, and he prescribed the same antibiotic. When I threw that back up, we called him again, and he said to try a more powerful anti-vomiting drug. We called the pharmacy, which delivered the drugs for free.

It worked, for the most part, but when nausea was still bothering me a few days later, I paid another $4 visit to the doctor. He told me to go to a lab down the street from his hospital and have a blood test and stool sample done. I went in without an appointment and walked out 20 minutes -- and $20 -- later. That afternoon, I picked up the results and read them to my doctor over the phone. The liver function test came back a little high, so he said to take it easy and go back two weeks later for the same tests. I did, and the levels were almost down to normal. The phone calls were free.
She then goes on to relate an anecdote about emergency care:
Even emergency care in India seems to work along the same lines. The same friend who first called a doctor for me had been in a horrific car accident about eight months before I arrived. He was taking a right turn at 2 in the morning when a truck came from the opposite side, ran into his car and just kept going. His femur was broken like a twig, as were his collarbone and wrist. His lip was split and his nose was hanging off his face.

Two months and a few surgeries later, he walked out of the hospital. He walks now without any aid and has had no major complications. The total bill, paid by his Indian insurance company, was less than $10,000. A similar accident in the U.S. would run up a $200,000 bill and bankrupt almost anyone who didn't have health insurance.
So how does this work so well? As Viswanatha explains, it's basically because India allows the free market to function:
How is this accomplished? Largely through supply and demand. Almost 25,000 doctors graduate from India's medical schools every year. Because there is so much competition, doctors and hospitals are forced to keep their prices low to get patients. Residents, who go to medical school straight from high school, only make the equivalent of a few hundred dollars a month. An average surgeon's salary would be around $8,000 per month. The take-home pay to fix a hip fracture, for example, might run between $100 to $300, out of the $1,000 fee to the patient, says orthopedic surgeon M.S. Phaneesha. At his hospital in Bangalore, he says, there are 20 orthopedic surgeons alone on staff. For 1,600 beds, the hospitals employs around 700 doctors full-time; 300 of them are surgeons. In the U.S., by comparison, a first-year resident might take home around $2,500 each month, and the average surgeon more than $20,000 per month. A hip fracture would cost a patient around $30,000, of which the surgeon's charge is $5,000. Even general practitioners in America earn on average more than $100,000 a year.

Another factor in India's costs is the tiered system of beds that most hospitals employ. One night in a general ward at the private Artemis Health Institute in a New Delhi suburb, for example, costs around $20 per night. One night in a single room, or a deluxe, or a suite, though, will cost you between $100 to $200. Services are similarly tiered. A general ward patient at Artemis would only pay $2 for an X-ray, while single-room patients would pay more. There are so many hospitals, says Artemis' chief operating officer Jose Verghese, that rates at the lower end stay low.
All is not perfect in India, however, with millions unable to afford basic care and a number of substandard doctors practicing medicine:
But this type of care isn't available to all Indians, since the average income in the country is still around $65 per month, and more than 300 million Indians out of a population of 1.2 billion still live on less than $1 per day. The poorest residents, just as they do in the U.S., often skip out on expensive treatments, and visit doctors only in serious situations. They do have access to free top-tier government hospitals for serious medical conditions. The national government and some state governments are trying out models to cover medical costs for its poorer residents, such as paying for certain surgical procedures or providing yearly vouchers that cover around $600 in expenses, to mixed results. Only 8 to 9 percent of Indians even have private health insurance, so most expenses are paid in cash, by the patient.

And about those doctors: Only a handful are from reputable institutions, explains Mahal. Quality of care varies throughout India, and is a big concern in smaller towns, where the more questionable institutes are based. But it is also a concern in the big cities. The sheer number of doctors is one of the main downward pressures on healthcare prices, but it's a good thing I had the name of a good doctor and didn't wander in off the street to the offices of a poorly trained M.D.
The fact that millions of Indians lack basic health care is not a damning indictment of the health care system, but of the country's vast poverty, which is in large part a result of its longtime socialist approach to economic development. Poor quality doctors, meanwhile, are hardly unknown here in the U.S. or any other country. As India becomes wealthier this problem is likely to diminish as more Indians get access to computers and other information devices that will better allow them to assess doctors and make more informed choices.

A few concluding thoughts:
  • The free market continues to work just about everywhere it is tried, with health care no exception.
  • The key to improved health care is not expanded insurance coverage but choice and competition, which drives up quality while reducing costs.
  • Would India be helped or hindered through the expansion of government-run health care to compete with the private sector?
Also check out this PBS article about eye care in India:
To date, Aravind doctors have treated 27.4 million outpatients and performed more than 3.4 million surgeries, in architecturally simple but technologically sophisticated - and sparkling clean - facilities. Aravind's error rate, around one percent, compares favorably with any American facility. Revenues from paying patients continue to support free care (on average one paying customer supports four free).

Perhaps the loudest testament to Aravind's self-reliance and its growth is the massive new Aurolab factory. It produces intraocular lenses, which are implanted after cataract removal. When doctors here began using these lenses in the early 1990s, they cost $50 to $100 a piece. Aravind's low costs and efficiencies instantly lowered that price to ten dollars. It now garners eight percent of the global market, exporting to 120 countries in the developing world. Aurolab lenses - tested to meet exacting international standards - now sell for as little as $2, about the price of a McDonald's hamburger.

Update: Thoughts on the Salon article from Jesse Walker at Reason.

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