By: Zeena Johar and Xue Ying Hwang

China and India, often cited as two rising economic powerhouses, are less than fully equipped in terms of health care, a key attribute of national economic development, according to Amartya Sen. Emergence of the United States, Europe, Japan and Korea as developed economic powerhouses validates Sen’s argument. China and India, representing one out of three people on the planet, must step up efforts to remedy the gaps in health care to realize their economic potential.

The two countries have adopted insurance as a tool to provide health-care access and mitigate catastrophic expenditures. India has 20 percent penetration of insurance while China has managed over 95 percent. Each nation has adopted an independent route towards achieving universal health coverage. Despite good intentions, both are struggling with the complexities of deploying insurance. China struggles with issues of limited health-insurance benefits and high out-of-pocket expenditure. India on the other hand struggles with variability across a myriad of insurance schemes and limited engagement of the private sector.

Global commitment to universal access

The United Nations reiterated its global commitment towards ensuring universal access to health care at the Sustainable Development Summit 2015. World leaders adopted a set of 17 Sustainable Development Goals to end poverty, fight inequality and injustice, and tackle climate change by 2030. Like the Millennium Development Goals, SDGs rigorously focus on global priorities such as maternal health, preventable deaths in newborns, and communicable diseases like AIDS, tuberculosis, malaria – and renewing focus on non-communicable diseases.

One ambitious goal is to achieve universal health coverage, including financial risk protection and access to quality essential health-care services for all.

For India, achieving universal health coverage is also a national priority. Penetration remains low, with 5 percent coverage by private insurance. Two significant sources of health-insurance coverage in India are sponsorship by employers or the government at the federal or state level.

Formal employment in India is available to 20 percent of the Indian workforce. Two significant employer-sponsored health-care insurance schemes in India, according to the World Bank, are the Employees’ State Insurance Corporation launched in 1948, providing access to more than 55 million beneficiaries, and the Central Government Health Scheme launched in 1954, providing access to over 3 million beneficiaries.

A pivotal moment in federally sponsored health insurance in India was the launch of Rashtriya Swasthya Bima Yojana , or RSBY, to families living below the poverty line. RSBY provides access to hospitalization for more than 100 million beneficiaries through a personalized smart card across a wide network of private-sector providers

India has many other state-sponsored health-care insurance schemes that target the population living below poverty line. Government-sponsored insurance in India stands out for proactive engagement of the private sector.

Abysmal Penetration

With India’s abysmally low penetration of insurance, the health-care sector continues to thrive on unregulated out-of-pocket spending by customers seeking medical care. For a patient in India, there is an inherent bias to seek care in private facilities because of perceived higher quality and benefits. These private facilities, having complete control over pricing their services, have little incentive to implement cost-effective strategies. One expected benefit as health insurance penetration rises in India is the ability of insurance payers to better negotiate prices for procedures and services with providers.

Unlike India, China’s main obstacle to achieving universal coverage is not insurance penetration, but rather the extent of financial protection within the existing insurance schemes. In 2011, 95 percent of China’s population was covered under one of its three main national health insurance schemes: New Rural Cooperative Medical Scheme, Urban Employees Basic Medical Insurance and Urban Residents Basic Medical Insurance. China’s three national schemes were each established within the past two decades in response to restructuring after Deng Xiaoping’s market reforms.

Yet, as reported by The World Bank, in 2013, individual out-of-pocket payments across all three schemes accounted for 34 percent of total health expenditures. Unable to afford the excessive out-of-pocket burden, 35 percent of urban households and 43 percent of rural households could not access health care– the limited access and financial protection benefits lead to financial strain.