OOP payments and resultant financial catastrophe
In KG Halli, 69.6% of the households made OOP payments for outpatient care for chronic conditions. As a result, 16% of households suffered financial catastrophe at a 10% threshold. There are no other Indian studies with which to compare our findings. In fact, the incidence of catastrophe in KG Halli, resulting only from OOP payments for outpatient care for chronic conditions, is much greater than the incidence of catastrophe from OOP payments for overall healthcare (healthcare for all types of ailments) in Karnataka (9.9%) and is comparable to that in India (15.4%)
. Mondal et al.
 revealed that in 2007, urban households in West Bengal spent 4.2% of their annual household expenditure on care for chronic conditions. This estimate is close to our estimate from KG Halli (i.e., 3.2%). In fact, our estimate is similar to that for the overall healthcare in urban Karnataka (3.3%) for the year 2004–2005
Thus, residents of KG Halli incur high OOP expenditure for outpatient care for chronic conditions. We also found that there was no significant difference in the incidence of OOP payments and financial catastrophe between the government sector, which is expected to provide free healthcare (or with nominal user fees), and the private sector as place for consultation. This finding seems to contrast with an earlier study that reported a greater likelihood of incurring financial catastrophe by households seeking healthcare from the private sector
. There may be several reasons for this finding.
First, 66.3% of the OOP payments were for medications during outpatient care for chronic conditions in KG Halli. High OOP spending on medications, even when government sector was used as place for consultation (66%), was likely due to the unavailability and/or frequent out-of-stock status of essential medications in the government sector. In KG Halli, where diabetes and hypertension are the most reported chronic conditions, one of the two government facilities does not stock anti-diabetic or anti-hypertensive medications, while they are frequently out of stock in the other facility. The median availability of generic medications, listed as the core medications by the World Health Organisation, at government facilities was only 12.5% in Karnataka
. Another major component of OOP payments for chronic conditions were expenses for laboratory investigations. In KG Halli, blood sugar testing is not conducted at either of the two government facilities. Thus, for medications and testing, the patients using government facilities in KG Halli as place for consultation must rely on private pharmacies and laboratories in the area, which leads to high OOP payments. Otherwise, patients must seek care from referral government hospitals/super-specialty hospitals, in which case they incur substantial travel expenditures. Our estimates indicate that 90.8% of OOP payments in the government sector come from expenditures for medications, laboratory testing, and travel.
High OOP spending for medications has remained a consistent feature in India and is not limited to chronic conditions. Estimates from the consecutive Consumer Expenditure Surveys (CESs) have revealed that in urban India, the greatest share of OOP spending has been on medications; 81.6% in 1993–94, 74.8% in 1999–2000, and 71.2% in 2004–2005
[9, 24]. Segregated estimates available from the CES from the year 1999–2000 for urban India further suggests that the share of OOP payments on medications (69.6%) was more for outpatient care (56.3%) than inpatient care (13.3%)
. In general, the trade liberalisation and reforms for pharmaceutical policies (especially regarding price control) in the last decade have been argued to be responsible for making medications more expensive in India
Second, there are user fees in government hospitals with subsidies/exemptions for people with below the poverty line ration cards. In KG Halli, only 10.5% of households have the below the poverty line ration cards. In fact, 39.2% of households in poor conditions do not possess the ration card, a document often needed to access subsidised healthcare. The remainder of households possess above the poverty line ration cards. Therefore, healthcare in government facilities is not entirely free for most of the sample population.
Finally, in KG Halli, the provision for outpatient care for chronic conditions is primarily by the private sector (nearly 22 clinics and 4 hospitals). Many of the private providers in KG Halli are informal providers (less/not qualified) and are likely to charge lower fees than qualified private providers. A study in Delhi slums also revealed that households were less likely to incur catastrophic expenditures when they sought care from informal/unregistered private providers rather than government providers, although this association was not statistically significant
. In essence, the government sector when used as place for consultation fails to provide affordable care to people with chronic conditions in KG Halli.
We found that the likelihood of incurring financial catastrophe was significantly greater when referral and/or super-specialty hospitals were used as place for consultation rather than clinics/health centres. This finding suggests that effective gate keeping with enhanced coordination across the levels of healthcare services may help to reduce financial catastrophe for patients with chronic conditions. We could not find other studies from India reporting the incidence of catastrophic expenditures by the levels of healthcare services sought.
We found that households with four or fewer members were more likely to incur financial catastrophe than larger families. With 67% of the population in the productive age of 15 to 60 years, it is reasonable to assume that larger households would have more earning members and more income, thereby making them less likely to face financial catastrophe. Our finding corroborates similar association found in earlier studies
OOP spending is inequitably high among the poor
We found that in KG Halli, the incidence of financial catastrophe is higher among poor compared with rich and that poor spends higher share of their income as OOP payments. This is reverse in case of overall healthcare (inpatient and outpatient) in Karnataka and at the India level
[9, 24]. However, if we examine the studies providing segregated information on OOP payments for outpatient care in urban India, the picture is different. These studies reveal that incidence of financial catastrophe and the OOP spending (as share of income) was higher among poor households
[22, 26]. A study from West Bengal also revealed that although OOP payments for inpatient care were progressive, they were regressive for outpatient care
These findings raise the question of whether the catastrophic payments are regressive in the case of outpatient care, even when they appear to be progressive for healthcare on the whole. This is an important question, as people with chronic conditions are more likely to spend repeatedly and incur greater cumulative expenses for outpatient care. The West Bengal study revealed that the odds of incurring financial catastrophe was greatest for outpatient care for chronic conditions, greater than that for inpatient care at various catastrophic thresholds
. Apart from the incidence, even the intensity of CHE was greatest among the poorest families in KG Halli. When poor households spend a greater part of their income as OOP payments, the absolute disposable income left with these households would be very less compared to rich households resulting in extreme financial distress.
OOP payments push people into poverty
In KG halli, OOP spending on outpatient care not only pushed people into poverty but also deepened the poverty they suffered. Berman and colleagues
 revealed that in 2004, nearly 4.9% of Indians fell below the poverty line due to OOP payments for outpatient care. In fact, the proportion of Indians falling below the poverty line due to OOP spending on healthcare has increased over the last decade
. To cope with OOP payments, most households used their savings, but for some ailments, they had to borrow money (3.4%) or even sell/mortgage their assets (0.2%). The West Bengal study reported that 11.3% of households borrowed money, while 0.5% of households had to sell and/or mortgage their assets to cope with OOP payments for outpatient care
Need to decompose expenditure analyses for chronic conditions
Considering the rising burden of chronic conditions in India and the fairly predictable need for long-term outpatient care for such conditions, segregated data about healthcare spending and its implications for outpatient care would be very useful for health managers/planners. Indrani Gupta
, in her paper on poverty estimation methods presented to the Planning Commission of India, also suggests the need to account for the differences in ‘acute vs. chronic conditions’ and ‘hospitalisations vs. outpatient care’ while measuring OOP payments and related poverty measures.
Untreated chronic conditions
In our study, respondents reported cases where family members were advised to use daily long-term medication but were unable to take it for various reasons. Such cases amounted to 3.1% of all reported chronic conditions. Analyses of the NSS from 2004 with regard to cardiovascular diseases and diabetes revealed estimates of untreated ailments similar to those of our study i.e., 4% of cardiovascular and 3% of diabetes cases
. We did not attempt to understand the reasons for the lack of treatment, but it seems logical to assume that financial constraints would be one of the primary reasons. Selvaraj and Karan
 report that financial constraints have remained the second major reason for not seeking healthcare in India for the last two decades, explaining 20% of non-treated ailments in urban India in 2004.
Our interest in studying the financing of outpatient care for chronic conditions grew from our work in KG Halli, where chronic conditions are highly prevalent and people face difficulties in accessing healthcare services. This limited focus should be remembered while considering our findings. In fact, the total OOP payments by households for overall healthcare could be much greater, and some of the associations we explored in this paper would be affected by these additional OOP payments for other ailments, including for inpatient care.
Our operational definition of chronic conditions used in this study missed individuals with undiagnosed chronic conditions. Studies in India have shown validity of using self-reports of morbidity
. Furthermore, our analysis focuses on healthcare expenditure and so a possible underestimation of illness prevalence would not affect it. The use of household income instead of the consumption expenditure (or non-food expenditure) for the calculation of CHE may lead to the overestimation of the household’s capacity to pay and an underestimation of the true CHE incidence. Importantly, our approach ignores households that chose to forgo healthcare and thus do not make OOP payments on healthcare. In fact, such households are likely to suffer from greater opportunity costs and the direct impact of ill health. Although a long period (nine months) of data collection would have probably overcome the seasonal differences in healthcare spending, the cross-sectional data could only provide the transient effect of OOP payments. We could not capture the long-term effects of OOP payments on these families.
The way forward
It is clear from our study that OOP payments on outpatient care for chronic conditions are causing significant impoverishment among people in KG Halli. Consistent with Samb and colleagues’
 argument, many of our study findings make a case for strengthening the existing healthcare system to improve access to quality care for chronic conditions. Our findings have direct implications for the resources for health systems (especially finances and medical products) and the way healthcare services are organised for delivering healthcare.
In the context of high OOP payments, it is important to provide financial protection for the population, thereby enabling people to access healthcare services. In context of very limited financial protection provided by government funded healthcare services in India, only approximately 25% of the population is covered by some form of health insurance
. Most of this limited coverage took place in the last few years, primarily through government-initiated health insurance schemes, and in particular, the Rastriya Swasthya Bima Yojana (RSBY), a national health insurance scheme that now covers approximately 100 million people living below the poverty line or working in the informal labour sector. However, except for a few federal government-initiated social insurance schemes that cover approximately 5% of the Indian population, these schemes do not cover outpatient care
. The Vajpayee Arogyasri, a health insurance scheme recently launched in Bangalore city that would cover residents of KG Halli, is also limited to inpatient surgical services
Using the NSS data, Shahrawat and Rao
 analysed the impact of various OOP payment scenarios (no payment for medication, no payment for inpatient care, no payment for outpatient care) on the incidence of catastrophic expenditures. They found that the maximum reduction in the incidence of catastrophic expenditures occurred when people did not have to pay for medications and/or outpatient care compared with a negligible reduction from subsidising the inpatient care. We join them in suggesting that schemes, such as RSBY, should increase the depth of coverage (or benefit package) to include medications and the breadth of coverage to include vulnerable families not necessarily falling below the poverty line as a way to significantly reduce OOP payment-related impoverishment. The recent launch of a pilot initiative to test the inclusion of limited outpatient care (consultations and medications) in RSBY is a welcome development
On the health services front, improvements in the availability of medications and diagnostics within the underfunded government sector (especially at health centres) and the control of the costs of such services in the private sector are needed. In the pluralistic healthcare delivery system of KG Halli, the efforts made in the frame of the UHARP to improve coordination across the healthcare providers with an enhanced gate-keeping function at the primary care level could reduce the unnecessary financial burden on households and improve the care for chronic conditions.
We only discuss the healthcare payments related impoverishment in this paper. It is important to consider this in context of the adverse social determinants that affect health and living conditions of urban poor communities. Limited access to drinking water, sanitation facilities, and education adversely affect their health and productively leading to deprivation
. Also, like in many low- and middle-income countries, India exhibits a ‘mixed health systems syndrome’ of low public financing, an unregulated private market, and poor governance in the health sector requiring reforms within and outside of the health sector