Medical Debt: A financial epidemic ravaging with Covid-19

The adage, “the calm before the storm” succinctly describes the interlude between the initial wave of Covid-19 infections, and the third wave wreaking havoc in the country.

In May 2021, India witnessed some of the most macabre sights of the pandemic: Images of people thronging to hospitals to seek life-saving treatment, the gory images of infected people gasping to breathe, pleas for hospital beds, oxygen cylinders, and "potentially life-saving drugs" Remdesivir and Methylprednisolone.

The sight of people coerced to run pillar to post is emblematic of India’s frail and vulnerable healthcare system, which has driven more people into a medical debt trap. However, this is not an anomaly that has been triggered by a once-in-a-century pandemic. According to the 77th round of the All India Debt & Investment Survey, medical treatment constituted 11.9% of the total household debt in rural India in 2019, whereas it formed 12.7% of the total household debt in urban India in 2019. Data journalist Rukmini S writes in her book, Whole Numbers and Half Truths: What Data Can and Cannot Tell Us About Modern India, “Medical treatment can and does drive poor families into debt. In 2019, medical treatment formed a greater component of total household debt in poorer households than in richer households.”

A slew of macroeconomic and microeconomic factors has culminated in this epidemic of debt to be a lot more conspicuous. Albeit the National Health Policy, 2017, envisages a healthcare expenditure amounting to 2.5% of the country’s GDP, India only spent 1.29% of its GDP on healthcare for the fiscal year 2019-20. Consequently, this shortfall of public medical infrastructure is sufficed by the country’s private healthcare system. According to World Bank data, India’s private health expenditure was 72.4% of the total current health expenditure (which includes personal health care and collective services) in 2018, whereas the global average was 40.2% in 2018.

The Indian population also bears the brunt of having the highest out-of-pocket expenditure in the world (the expense the populace bears out of their own cash reserves). The World Bank data computes India's out-of-pocket expenditure at a staggering 62.7% of the current healthcare expenditure in 2018, whereas the global average is only at 18.1% in the same period. The National Health Policy also envisages bringing down this expenditure to 30% of the overall healthcare spend.

India also recorded an out-of-pocket expenditure per capita of about ₹3,392 (based on the current exchange rate) in 2018, a figure which ostensibly skyrocketed during the second-wave. A study by Christophe Jaffrelot, the French political scientist and Indologist, and Vihang Jumle reads, “up to 80.9% of people in urban India and 85.9% in rural India do not have any health coverage. Over 80% of Indians have been paying for private healthcare from their own pockets.” It also recounts how, during the second wave, it became apparent that the average cost of treatment during the second wave was ₹20-25,000/day without ventilators—with some hospitals charging a further ₹20-25,000/day for ventilator support.

While the healthcare expenditure in the country has increased exponentially, the income and wealth of Indians have decimated, as the pandemic and the lockdowns induced by it have been unforgiving for economic activity. According to the World Inequality Report 2022, average national income of the Indian adult population is ₹204,200. It also classifies India as a “poor and very unequal country, with an affluent elite.”

The report also reads that the top 10% and top 1% hold respectively 57% and 22% of total national income, and the bottom 50% share has gone down to 13%—making the poorest also the most vulnerable to falling into a medical debt trap. Rukmini’s book also argues that the Ayushman Bharat scheme—which provides public health insurance for the underprivileged—is too new a measure to have an impact on India’s out-of-pocket expenditure. However, certain roadblocks have been identified. The scheme continues to be underfunded, which according to Jafrrelot and Jumle, disincentivises Apollo, Max, Medanta—the biggest private, not-for-profit hospital chains in the country—to be a part of Ayushman Bharat. “Few private institutions joined the scheme because of the low reimbursement rates the government was offering for consultations and surgery,” they write.

As yet another variant is ushering into the world’s second-most populous country—with an even more mystical transmissibility, that potentially has a confounding ability to devastate an already frail economy, providing people uninterrupted access to healthcare facilities, especially in the case of an emergency, has to be facilitated to avert families from being driven to a state of penury. “A way that the government could go about speeding up the process is by actioning its recent health policy and partnering with the private sector, instead of fighting it. Private healthcare, because of being a business unit, is highly efficient but not very equitable,” write Jaffrelot and Jumle.