Policy Implications from a State-Level Health System Assessment

Key Findings and Policy Implications from a State-Level Health System Assessment


Over the past few years, India has introduced several major healthcare reforms like the National Health Mission (NHM), Pradhan Mantri Jan Aarogya Yojana (PMJAY) and the Health and Wellness Center (HWC) Programs, and the recent National Digital Health Mission (NDHM). In addition, India has implemented various state-level initiatives on health financing and healthcare delivery—all seeking to improve the health system’s performance. There have, undoubtedly, been some significant achievements, especially in increasing access and utilization of health services. However, India continues to face challenges in achieving better health system outcomes such as assuring financial risk protection, affordable and equitable access to quality healthcare, efficiency in service delivery, and citizen satisfaction about how the health system performs.

To design effective solutions for these persistent challenges, we first need deep and comprehensive diagnoses of their root causes – a systemic analysis of the health system. With this aim, the Harvard T.H. Chan School of Public Health (Harvard) in 2019-2020 undertook the Health System Assessment Study in Odisha, one of the poorest states in India, with a population of ~40 million. This study is a part of the Odisha Health System Project led by Harvard T.H. Chan School of Public Health (Harvard) with support from the Bill and Melinda Gates Foundation (BMGF). The project’s overarching goal is to design evidence-based solutions for Indian states to improve affordable and equitable access to quality care while avoiding major financial risks and improving citizen satisfaction.

The study provides a comprehensive and evidence-based assessment of Odisha’s health system. It diagnoses the underlying causes of the strengths and challenges, measured in terms of UHC goals like financial risk protection, access, quality of care, and citizen satisfaction. As the first large-scale health system assessment in India, the lessons from the study apply not just to Odisha but to the comparable Empowered Action Group (EAG) states, which together represent more than 52% of India’s population.

Like many other states in India, Odisha has made progress in maternal and child health (MCH) and nutrition. These advances reflect the government’s priorities and donor support for vertical programs in MCH. However, as India aspires to move towards UHC, many challenges lie ahead and its health care system requires revisioning and redesigning, especially given the additional challenges in the context of the COVID-19 pandemic.

Key Findings

Current public insurance program in India does not address the main cause of financial hardships: Residents in Odisha experience high financial risks, with out-of-pocket spending on medicines from the private sector contributing up to 69% of all expenses, even for people who seek care at public sector health facilities. Most health expenses and financial hardships were due to spending on drugs, especially for outpatient care, rather than on hospitalizations. Existing government health insurance programs provide limited protection against these financial hardships as it covers only hospitalizations and not outpatient care or medicine expenses, which are the primary source of high health spending. Similar levels of financial hardships are faced by both insured and uninsured families, and at both public and private sector hospitals.

The private sector, formal and informal, constitute a main source of care: The majority of residents (54%) seek outpatient care from the private sector, including from chemist shops. A larger number of people go to chemist shops and solo providers (both qualified and unqualified), rather than to public sector primary healthcare facilities, like PHCs, Sub-Centers, and Health and Wellness Centers (HWCs). Even when people seek care at public sector facilities, ~70% buy their medicines from private chemist shops. This is due to 1) the poor availability of drugs at public sector facilities: only 38% of essential medicines were in stock at PHCs and a mere 18% at Sub-Centers and 2) inconvenient locations and opening hours of the public sector.

Quality of care is very poor across all providers: Low quality of care is one of the most significant challenges for Odisha’s health system. Ours was the first study to assess the quality of care from both patient and provider perspectives at a state level. We found poor competence among providers to diagnose and treat common conditions, poor patient safety culture in public sector hospitals, and low levels of patient satisfaction, especially among vulnerable groups. Only 2.4% of outpatient care providers knew the correct treatment for common conditions, including illnesses like TB, diarrhea, and pre-eclampsia, which have been national priorities for decades. All providers, irrespective of their qualifications, in rural and urban locations and across public and private sectors, prescribed incorrect and unnecessary treatments. Over 90% of public hospital staff have never reported adverse events and medical errors, which are critical for improving patient safety. These worrisome findings raise the question: are people getting value for their money spent?

The public delivery system suffers from inefficiencies: Public sector facilities in Odisha have lower than recommended occupancy rates, sub-optimal staff mix, and idle capacity of doctors. There is a lack of backward referrals from hospitals to primary care facilities even for simple illnesses. This result indicates that public hospitals are not being used to their full potential and that scarce and more expensive resources like specialist care and hospitals are inefficiently used for cases that could be managed at lower-level facilities.

Citizens are dissatisfied with the health system: Our assessment of citizen satisfaction, the first in India, can help inform policymakers and political leaders about how the public views the health system and the new health reforms. We found that 91% of the surveyed respondents expressed that the health system needs improvement and 33% felt that the health system needs to be completely rebuilt. Confidence in the health system was lower among people in rural areas, those belonging to lower castes and tribal groups, those without insurance coverage, and among households with low income and educational attainment, raising concerns about equity of health system performance for different population groups in Odisha.

Policy Implications

Re-visioning and re-designing India’s health care system require a system approach

Improve coverage of people and service: Current government health insurance programs need to expand benefits beyond just hospitalizations to include outpatient care – the major cause of out-of-pocket expenses and financial hardships. Coverage of populations and services not currently covered by government health insurance programs can be financed by a combination of additional government spending and innovative prepayment mechanisms that leverage existing social capital (trust and a shared commitment to the common good) in the community.

Increase value for money: Poor quality of care and inefficient systems lead to wastage of resources both at the individual and health system levels. To improve quality and efficiency requires a multi-progroned strategy:

  • Rethink provider incentives: Strategic purchasing and provider payments are powerful levers to create appropriate incentives to change provider’s behavior. For the public sector, input-based line-item budget and salary could be reformed to tie to outputs and outcomes. For the private sector, it is strongly advisable to move from fee-for-service to other forms of payment methods that incentivize efficiency and quality improvements, such as capitation and case-based payment that tie with performance.
  • Reform public sector governance: Inefficiencies in public sector facilities need improved systems of governance that have clear social objectives and that hold providers accountable for their roles and responsibilities. Public providers should also be given certain autonomy, such as staffing, drug stocking, so they have the flexibilities in making decisions to achieve their social goals.
  • Strengthen regulation of the private sector: regulations for the private sector’s qualification, quality, standards of care and their enforcement are greatly needed.
  • Leverage data-driven management information system: India has a lot of strength in modern information/data system that holds promises for improving quality and efficiency. However, the data system needs to be integrated with improved incentives and accountability systems. Data system on its own will not produce quality and efficiency improvements.

Health reforms need to consider both public and private sectors: Policy design, especially for outpatient care, needs to consider the private sector, including independent practitioners and chemist shops that provide most of the care.