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The relation between health and poverty is no new concept. The poor are unable to afford healthcare due to low income which leads to illness and deteriorating health. Continuous illness means they are unable to work which leads to low income and poverty. This is essentially the “health trap.” Thus, if free or low-cost healthcare services are made available to the poor, then the problem can be solved. However, in reality, things are not this simple. The article discusses the public and private healthcare setup in rural India and how usage of these low-cost healthcare services is much harder than it seems.

Healthcare is a credence good, one whose quality cannot be assessed immediately after purchase and there are large information asymmetries in the sector. It involves a high degree of trust of the patient on the provider. Due to these complexities, providing healthcare services to the poor is much more complicated than it seems. Hence, default policies in low and middle-income nations are publicly funded healthcare facilities. Public healthcare facilities consist of skilled professionals who provide free or low-cost healthcare services. It is highly regulated in contrast to the private sector were there hardly any regulation, especially in India. The private sector often consists of providers with no formal medical training who charge fees that varies a lot but on an average is multiple times higher than those of the public sector. The private sector also lacks in healthcare infrastructure with most providers in rural India conducting check-ups in single room houses which often lacks with required equipment. Thus, public sector seems to be the clear winner in providing healthcare services to the poor. However, to everyone’s surprise, the market share of private healthcare providers in rural India is 70% (NFHS-3, 2015-16). The logical explanation for this could be the lack of public options for rural households. However, primary care visits are 80% even when there is a qualified doctor providing free healthcare in public clinic. Clearly, there is some other reason that makes the poor prefer private facilities over inexpensive public healthcare (Das, et al., 2015).

As Duflo and Banerjee point out in their award-winning book “Poor Economics,” that there are much low hanging fruits in the form of vaccines, bed nets, ORS, which could save lives at minimal costs, yet only a few people use them. Government workers, in public sector, are often blamed for this failure although not entirely unfairly. They, on the other hand, suggest that plucking these “low hanging fruit” is much harder than it seems. For example, when a child comes with diarrhoea, the public providers offered them a packet of ORS, but most mothers didn’t believe ORS could do any good. They wanted antibiotics or injection hence they never came back for more ORS packets. Similarly, cheap and simple technologies like chlorine, bleach, ORS, boiled water, sugar and iodised salt if properly used can improve health and save lives, yet they are hardly used. It is not as if the people don’t care about their health. They do, and they devote considerable resources to it but elsewhere in antibiotics and in surgery that comes too late.

An audit based study in rural Madhya Pradesh, using standardised patient and then recording the quality of care was conducted by Jishnu Das and a couple of other economists (Das, et al., 2015). The doctors’ answers and questions they choose to ask were compared with a list of “ideal” questions and responses. It was observed that the average competence was remarkably low. Even the very best doctors asked fewer than half the questions they should have, and the worst doctors asked only one-sixth of those. Moreover, the majority of doctors would have recommended a course of action which was more likely to harm than good. However, it was observed that even though most private providers lacked formal medical training, they spent more time with patients and completed more essential checklist items than public providers and were equally likely to provide a correct treatment. Further, the performance of qualified doctors was compared across their public and private practices, and it was observed that the same doctors exerted higher effort and were more likely to provide a correct treatment in their private practices than public practices (Das, et al., 2015). Thus, doctors underdiagnose and overmedicate. The usual form of treatment for fever, diarrhoea or vomiting is antibiotics or steroids which are usually injected. These studies show that healthcare is provided in a way that is unnecessary and expensive.

First, the ineffectiveness of the public healthcare system needs to be blamed. Public facilities even though comprised of trained medical providers suffer from a large number of issues. Doctors absences in public clinics were 43% in 2003 and 40% in 2010 (Muralidharan et al., 2011). In rural areas, these numbers are even higher. This is largely because of the fixed salary that public doctors receive irrespective of the number of patients that they deal with. Further, public healthcare suffers from poor regulation and accountability. More than 80% doctors agree rules are frequently flouted and “appropriate payments” can circumvent disciplinary actions, even for grave negligence (La Forgia and Nagpal, 2014). This ineffectiveness can be extended to sanitation and clean drinking water. Access to proper sanitation and clean drinking water is at extremely low levels in rural India, which are the most inexpensive and best tools to solve most health problems. Even though toilets are being built under “Swatch Bharat” scheme, the availability versus usage issue still exists similar to those of public healthcare facilities.

Perhaps, low usage of public healthcare facilities is because they don’t work well. However, even when district authorities were effective in reducing sharp absenteeism from 60% to 40%, it did not affect the number of people who came to the facilities.1 Similarly, low immunisation rates are often blamed upon absent nurses.

The conventional economic theory has largely failed to explain this phenomenon. Modern behavioural economists, on the other hand, believe that the reason why the poor behave in the way that they do is much more psychological than rational economic logic. This psychological behaviour largely comes from misinformation or lack of information. For example, the people in rural areas believe that private doctors are much better than the public ones. They don’t care much about higher medical qualifications of public ones since public doctors usually spend less time per patient and ask fewer questions leading them to believe that they are providing poor healthcare services. Private doctor on the other hand despite their low or no formal medical qualification tend to ask more questions and spend more time per patient thus making the poor believe that they are indeed better doctors. Further, people in rural areas usually want an antibiotic or steroid either a tablet or injected directly which private providers are more likely to provide than the public ones. Together these factors make the poor value private doctors over public ones. Further, “free” is often considered to be worthless or of lesser value psychologically.

It is even difficult to understand from the immunisation experience since it does not fix an existing problem instead protects against potential future diseases. Further, immunisation is specific as in the children get immunised against particular diseases like polio, measles or diarrhoea. So when a child gets sick despite being immunised, then the parents feel cheated especially since parents are often undereducated in rural areas. In a closed community like villages, word travels fast about the ineffectiveness of immunisation which makes others see no incentive in immunising their child. The parents also often do not understand why multiple shots are needed and why it is important to undertake full immunisation.

An experimental programme in Udaipur, Rajasthan under Seva Mandir revealed certain key aspects. The programme was simple as 2 pounds of dried dal was offered for each immunisation and a set of stainless steel plates were offered upon completing the course. The programme was a roaring success as the immunisation rates in the village where the camps were set up increased sevenfold to about 38% from about 6%. Also in all neighbouring villages, the immunisation rates increased. Further, it was observed that by offering dal, Seva Mandir lowered the cost per immunisation by increasing efficiency.2 This programme illustrates that a push or nudge is required to do the “right” thing. Nobel laureate Richard Thaler in his best-selling book “Nudge: Improving Decisions About Health, Wealth, and Happiness” explains why certain interventions or nudges are required to solve these problems. The small incentive in the form of dal was a way to nudge people to act today rather than indefinitely postpone it.

One way of nudging is to make the “right” thing, the default option so that people would need to actively move away if they don’t want it and this moving away decision would involve a small amount of cost. For example, the challenge with chlorinating water at home is that one has to remember to do it and also has to do it finally. The way to nudge people to drink chlorinated water would be to provide it by default in piped water. Upon closely analysing one can easily find such nudges deeply embedded into the developed urban world which we often take for granted. For example, chlorinated water is supplied to our houses; only iodised salt is sold in the market, vaccines are compulsory in order to get the child into a school.

Thus, low-cost public healthcare services are definitely required, but they don’t solve the entire problem. Provision should be correspondingly followed with awareness or nudges which shall make people use these services. Further increasing accountability and better management in public healthcare shall solve a number of problems. Clean drinking water and better sanitation can make the greatest impact in shaping rural health.  India’s poor rural health cannot be improved overnight nor can it be rectified with a single policy measure. A combination of good measures shall slowly push the country towards better rural health.


References –

Photo Credits - Anindito Mukherjee. Reuters India.

1 Banerjee, A., Duflo, E., and Glennerster, R. (2008). “Putting a Band-Aid on Corpse: Incentives for Nurses in the Indian Public Healthcare System.” Journal of the European Economic Association. 2008. pg. 487-500

2 Banerjee, A., Duflo, E., Glennerster, R., and Kothari, D. (2010). “Improving Immunisation Coverage in Rural India: Clustered Randomised Controlled Immunisation Campaigns With and Without Incentives.” British Medical Journal. 340. pg. 2220

National Family Health Survey -3 (2016). The Ministry of Health and Family Welfare, Government of India.

Das, J., Holla, A., Mohpal, A., and Muralidharan, K. (2016). Quality and Accountability in Healthcare Delivery: Audit-Study Evidence from Primary Care in India. American Economic Review. 106(12), pp.3765-3799

Muralidharan, K., Chudhury, N., Hammer, J., Kremer, M., and Rogers, F. H. (2011). “Is there a Doctor in the House? Absent Medical Providers in India.” Working Paper.

Gerrard, L. F., and Nagpal, S. (2014). Government Sponsored Health Insurance in India: Are You Covered? The World Bank, Washington, DC.

Duflo, E., and Banerjee, A. (2011). Poor Economics: Rethinking Poverty and the Ways To End It. Penguin Books India

Thaler, R. H., and Sunstein, C. R. (2009). Nudge: Improving Decisions about Health, Wealth and Happiness. Yale University Press




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Written By Purushottam Mohanty

Economics Undergrad | Delhi University

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