Countering The Imbalance In Health Care Financing

A Study On Karunya Benevolent Fund

Abstract
The aim of this paper is to analyze the growing health care expenditure in Kerala and the
governments effort to reduce out of pocket expenditure through the Karunya Scheme. The
scheme breaks new ground on several different fronts in providing health benefits to large
number of under privileged populations.

1. Introduction
It is very widely acknowledged that health is an important component of human
development. Empowerment of people comes from the freedom they enjoy, and this
includes, among others, freedom from poverty, hunger, and malnutrition, and freedom to
work and lead a healthy life (Sen, 1999). Access to health care is critical to improving health
status and good health is necessary for empowerment. Government intervention in health is
also argued for, due to the presence of high degree of asymmetric information in the health
sector. Not surprisingly, throughout the world, governments have had a significant role in
providing and regulating health services and their role is particularly important in
developing countries with large concentration of the poor.
Despite poor health indicators, government spending on health care in most low- and
middle-income countries is well below what is needed. Low revenue collections, competing
demands for revenues, and relatively low spending priority contribute to this insufficient
spending.1 1Consequently, limited access to public health care facilities forces people to go
to private providers, resulting in substantial out-of-pocket (OOP) spending, especially for
the poor.2
Universal health care is providing access to key primitive, preventive, curative, and
rehabilitative health interventions for all at an affordable cost.3 However, most low- and
middle income countries find this a major challenge, as it would require substantial increases
in public spending and productivity increases in an environment of severely strained
resources. Of course, there has been considerable success in achieving universal health
coverage in some middle-income countries, including Thailand and some Latin American
countries, while other countries, such as China, Indonesia, and Vietnam, are focusing their
attention on improving access.
1

Heller (2006) defines fiscal space as the availability of budgetary room that allows a government to
provide resources for a given desired purpose without any prejudice to the sustainability of a governments
financial position
2

WHO, 2004

World Health Assembly, 2005.

The health sector challenges in India, like those in other low- and middle-income countries,
are formidable. Further, the gap between the actual spending and the required amount is
larger in the relatively low-income states and this results in marked inter-state inequality.
Of course, there have been some recent initiatives to augment public spending on health
care, but these have met with only limited success. The National Rural Health Mission
(NRHM), established in 2005, and the recent introduction of Rashtriya Swastya Bima
Yojana (RSBY) a national health insurance scheme for people below the poverty line are the
two most important initiatives by the central government. Several state governments also
have come up with their own insurance schemes. Despite these initiatives, the actual public
spending on health has not shown much increase.4

2. The Critical Need For Health Care For Under Privileged

India was one of the pioneers in health service planning with a focus on primary health care.
In 1946, the Health Survey and Development Committee, headed by Sir Joseph Bhore
recommended establishment of a well-structured and comprehensive health service with a
sound primary health care infrastructure. This report not only provided a historical landmark
in the development of the public health system but also laid down te blueprint of subsequent
health planning and development in independent India.
Health is a primary human right and has been accorded due importance by Constitution 5 It
stresses upon state governments to safeguard the health and nutritional well being of the
people, the central government also plays an active role in the sector. Improvement in the
health status of the population has been one of the major thrust areas for the social
development programmes of the country. This can be achieved through improving the
access to and utilization of Health, Family Welfare and Nutrition Services with special focus
on underserved and under privileged segment of population. Main responsibility of
infrastructure and manpower building rests with the State Government supplemented by
funds from the Central Government and external assistance.
Most rural and informal sector workers in the world do not have any form of health security.
The labour sector of the Indian economy consists of roughly 487 million workers, the
second largest after China. Of these over 94 percent work in unincorporated, unorganised
enterprises ranging from pushcart vendors to home-based diamond and gem polishing
operations.6However, they are poor, most of them are not in employer-employee
relationships, they do not have any form of security (e.g. maternity benefits, retirement,

Economic Survey 2013 claims that Indias GDP has extended its spending on health by 13% the same survey
also points out that it has the lowest health spending as a proportion of its GDP.
5

Article 21

India's Ministry of Labour, 2008 report

health insurance), nor do they have representative organizations that might help them fight
for these benefits.7
The poor are particularly vulnerable to the lack of health security. The poor spend a greater
percentage of their budget on health related expenditures. Further, the high incidence of
sickness cuts into their budget in two different ways, i.e. they need to spend large amounts
of money for treatment and are unable to earn money while under treatment. In fact,
healthcare costs are one of the primary reasons for rural indebtedness and poverty.
Moreover, there is the issue of accessibility. Obtaining treatment at a town or district level
hospital involves travel costs, which are not insignificant. Thus for many, simply accessing
health care is by itself, an expensive proposition.

Health care covers not merely medical care but also all aspects pro preventive care too. Nor
can it be limited to care rendered by or financed out of public expenditure- within the
government sector alone but must include incentives and disincentives for self care and care
paid for by private citizens to get over ill health. Heath care at its essential core is widely
recognized to be a public good. Its demand and supply cannot therefore, be left to be
regulated solely by the invisible hands of the market.
Thus, we need to focus on
-

Universal access
Fair distribution
Special attention to vulnerable groups and under privileged
Redefining the role of government in health care system

Fair financing of the costs of health care is an issue in equity and it has two aspects
-

How much to spent by Government on publicly funded health care and on what
aspects?
How huge does the burden of treatment fall on the poor seeking health care?

3. Public Private Participation in Healthcare

A publicprivate partnership (PPP) is a government service or private business venture
which is funded and operated through a partnership of government and one or more private
sector companies. These schemes are sometimes referred to as PPP, P3 or P3. The public
sector model in healthcare has not been able to accomplish its objectives of providing better
healthcare facilities in affordable rates covering most of the population in India. The publicprivate partnership or PPP model seems like an ideal alternative to curb the current situation
and provide universal health coverage.
The model looks into a partnership between the public healthcare facilities and the private
ones. This is mainly done by the government sponsoring the private players to work in a
particular field. The model has successfully worked in various other sectors like the airports,
telecom, irrigation and etc.
7

Ahmad et al. 1991, Gumber & Kulkarni 2000

Table -1 Successful PPP Projects in India

Sl.No: Location

Private Player

Karnataka

Narayana
Hrudayalaya

Karnataka

Narayana
Hrudayalaya

Jaipur

Sawai Man Singh Life Line Fluid

Drug Store to
Hospital, Jaipur

Birla Institute of
Scientific Research
(BISR).

Uttaranchal

Gumballi and Karuna Trust

Sugganahalli,
Karnataka

Tamil Nadu

World Bank aided

health system
development project
potential non

Nature of the Name of the

program
Programme
Coronary Care Karnataka
Units of
Integrated
selected district Tele-medicine
hospitals linked and
Telewith Narayana
health Project
Hrudayalaya
(KITTH)
hospital.

Target
population
rural and
semi-urban
patients

Health
insurance
scheme

Yeshasvini:
Cooperative
Farmers
Healthcare
Scheme

Rural poor

Contracting in
Sawai Man
Singh Hospital,
Jaipur

Low cost
medicine
for
rural
poor

The Uttaranchal
Mobile Hospital
and Research
Center
(UMHRC)

poor and
rural
people in
hilly
terrains.

PHCs in
Gumballi and
Sugganahalli,
Karnataka

tribal
community
in the hilly
areas.

contract out low

cost high
quality
medicine and
surgical items
on a 24-hour
basis in the
hospital.
to provide
health
care and
diagnostic
facilities to poor
and rural people
at their doorstep
in the difficult
hilly terrains.
Management of
Primary Health
Centers in
Gumballi and
Sugganahalli
contracted
to Karuna Trust
in 1996 to serve
the tribal
community in
the hilly areas.
Emergency
Ambulance
Services
scheme in Theni

Emergency
Rural poor
Ambulance
in Theni
Services scheme

governmental
partner - Seva
Nilayam

district of Tamil
Nadu to reduce
maternal
mortality rate .
Manage health
centers in the
slums of
Adilabad.
to increase the
availability and
utilization of
health and
family welfare
services
to give superspecialty health
care at low cost
to the
people Below
Poverty Line

Urban Slum
Health Care
Project, Andhra
Pradesh

slum
dwellers

Rajiv Gandhi
Super-specialty
Hospital,
Raichur

BPL
people

to provide well
trained female
health activist

Accredited
Social Health
Activist
(ASHA)
training
program
Rajiv Gandhi
Arogya Yojana

Rural poor

Andhra
Pradesh

Different NGOs

Raichur

Karnataka

Apollo hospitals
Group, with
financial support
from OPEC
(Organization of
Petroleum Exporting
Countries)
National Rural
Health Mission

10

Chhatrapati
Asia Heart
Sahuji
Foundation
Maharaj
Nagar district.,
UP

To provide
basic
healthcare, set
up a chain of
primary
healthcare
centers

Rural poor

Source: Ministry of finance, Government of India Report (2012)

4. Rethinking the Kerala Model in Health care

The Kerala model of development, based on the development experience of the southern
Indian state of Kerala, refers to the state's achievement of significant improvements in
material conditions of living, reflected in indicators of social development that are
comparable to that of many developed countries, even though the state's per capita income is
low in comparison to them. Achievements such as low levels of infant mortality and
population growth, and high levels of literacy and life expectancy, along with the factors
responsible for such achievements have been considered the constituting elements of the
Kerala model.
More precisely, the Kerala model has been defined as:

A set of high material quality-of-life indicators coinciding with low per-capita incomes,
both distributed across nearly the entire population of Kerala.
A set of wealth and resource redistribution programmes that have largely brought about
the high material quality-of-life indicators.
High levels of political participation and activism among ordinary people along with
substantial numbers of dedicated leaders at all levels. Kerala's mass activism and
committed cadre were able to function within a largely democratic structure, which their
activism has served to reinforce.

While India ranks at the bottom of the Index in overall score, Kerala, if measured on the
same points, would buck the trend. With only 3% of India's population, the tiny state
provides two-thirds of India's palliative care services. The Economist has lauded the 'Kerala
Community Model' in healthcare.
After the year 2000, a number of studies focused on the increasing burden of disease in
Kerala: besides heart disease and diabetes, road traffic accidents and their consequences
were on the rise, as were suicides. Apart from these lifestyle diseases, which could be
attributed to large-scale transformations in society, Kerala at this juncture also witnessed the
reappearance, or even the resurgence, of infectious diseases: epidemics of dengue,
chikungunya, rat fever and hepatitis became an annual feature in the state. This indicated
large-scale environmental degradation. Most water sources were polluted, and garbage
disposal in urban areas loomed large as an insurmountable problem. Many micro-level
studies pointed to the high expenditure in health care, which were driving many families to
financial ruin and suicide.
A large proportion of families, both in rural and urban areas, depended on private health
care. Data also indicated that Kerala had become, ranked by income inequality, one of
Indias leading states. In health, as in many other things, Kerala had become a non-model.
The trend of health care expenditure (medical and public health) as a proportion of total
revenue expenditure for the last 12 years along with other major Southern states shows
Kerala continues to perform relatively better than the other states. Even though the share of
medical and public health expenditure has come down over time (after 2001-2002). Overall,
medical and public health revenue expenditure as a per cent of GSDP has declined from 0.97
per cent in 198485 to per cent to 0.63 in 201011. Despite intensive efforts by the state,
health challenges remain which are not being adequately addressed by current health
policies and practices. These challenges are three-fold and are presented in following Figure.
6

Figure 1: Health challenges

HEALTH STATUS

Health indicators not par with developed nation

Increasing incidence of diseases
Gender issues and age related issues

HEALTH
INFRASTRUCTURE

Inadequate Infrastructure
Declining public health centers and community health
centers

Increasing Out of pocket Expenditures

HEALTH
FINANCING

Increasing Per capita Expenditures

Focusing on the third point, health financing, there has been increasing privatisation of
health care services in Kerala. However, price of private health care turns out to be
exorbitantly high, which impedes poor people to access this system. Quality control and
monitoring of the services also would become a grim issue in the private system.
Out of pocket expenditure on health has also increased significantly in Kerala. It is widely
acknowledged that out-of-pocket (OOP) expenditure on health care has significant
implications for poverty in developing economies. Out-of-pocket payments for health can
cause households to incur catastrophic expenditures, which in turn can push them into
poverty. It is evident from the following table that, Kerala has experienced the highest
increase in out-of-pocket expenditure. This shows the vulnerability of Keralas population to
health care expenditures.
Table 2: OOP spending on healthcare as a percentage of total expenditure
States
Andhra Pradesh
Assam
Bihar
Chattisgarh
Delhi
Goa
Gujarat
Haryana

Rural
4.9
1.6
2.8
5.2
1.6
2.4
3.8
5.0

Urban
4.1
2.6
3.0
5.9
1.9
3.8
3.8
4.1

Total
4.7
1.7
2.8
5.3
1.9
2.9
3.8
4.8
7

Himachal Pradesh

5.1

5.0

5.1

Jammu & Kashmir

Jharkhand
Karnataka

2.5
3.2
3.4

2.3
4.4
3.3

2.4
3.4
3.3

Kerala

7.8

6.6

7.5

Madhya Pradesh
Maharashtra
Orissa
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttarakhand
West Bengal
Dadra & N. Haveli

5.3
5.5
4.1
5.5
4.3
3.8
6.8
3.8
5.1
1.8

4.0
5.0
3.7
4.1
4.4
4.0
5.4
3.0
5.0
2.4

5.0
5.3
4.0
5.1
4.3
3.9
6.5
3.6
5.1
1.8

Source:Estimates From NSS 61st Round, Paper presented for consideration of the Expert Group on Poverty,
Planning Commission 12 May 2009

To counter these challenges, the state government has launched several health initiatives
under the purview of the National Rural Health Mission (NRHM). NRHM came at an
opportune time, when the state was finding it difficult to meet the demand for resources.
Apart from various programmes that are implemented in all the Indian states through
National Rural Health Mission (NRHM), there are certain special initiatives that have been
implemented in Kerala. One such initiative is Karunya Benevolent Fund Scheme to ensure
that Keralites of all ages and backgrounds can have affordable and an equitable chance of
achieving health.

5. Karunya Benevolent Fund Scheme by Kerala GovernmentPublic-government-public participation model

Health financing is the most urgent issue of all for a health care strategy. It is impossible to
envision dealing with access or quality without addressing this aspect. It is crucial for the state
government to take initiatives to provide financial coverage for health depending on the income
strata of people. It is an important strategy to provide access and quality health care to every
citizen.

The Karunya Benevolent fund Scheme introduced by K.M Mani, finance Minister of Kerala
in 2011-2012 Budget. The Union Defence Minister A. K Antony inaugurated the scheme on
Feb 26, 2012. Karunya Benevolent Fund' - provides financial aid for poor people suffering
from serious ailments, by raising funds through Kerala lottery named Karunya Lottery.

Karunya Benevolent Fund is providing financial assistance to under-privileged people

suffering from acute ailments like Cancer, Hemophilia, Kidney and Heart diseases and for
Palliative Care. The amount for the health scheme is raised through lottery. This welfare
measure will be helpful to those who suffer from ailments, the cost of treatment of which are
proved to be unbearable to lower and even middle strata of society. The income generated
through the sale of Karunya Lottery is exclusively devoted for extending financial assistance
to the purpose.
Since then the scheme is providing financial assistance to under privileged people suffering
from acute ailments. The Karunya Benevolent Fund has so far funded the medical expenses
of around 22,000 patients amounting to Rs2.86 billion.
In 1967, when the Kerala government launched lotteries, it was the first state to do so in the
country. After trying out some special-purpose lotteries like draws for sports, education and
welfare of jawans, the state government decided to launch Karunya lottery in 2011-12. The
department set aside the revenue from this lottery to fund the Karunya scheme. The
treatment under the Karunya scheme was initially provided through the government medical
colleges and hospitals. But now 62 private hospitals have been accredited to the scheme.

6. Achievements

Under Karunya, families with income below Rs 3 lakh per annum (these would also
include those above the poverty line) are given financial assistance up to a maximum
of Rs 2 lakh. The ailments covered under the scheme are cancer, heart disease,
kidney trouble and palliative care. For some diseases like haemophilia the assistance
is up to Rs 3 lakh.

July 2012, The government give accreditation to 32 private speciality hospitals for
treatment of poor patients using grants from the Karunya Benevolent Fund

In April 2013, the scope of Karunya Benevolent Fund scheme for the poor and
underprivileged extended to cover mental illness, thalassemia and sickle cell
anaemia.

In July 2013, new dialysis centre opened at Government Medical College

Trivandrum, as a pilot project of the Karunya Benevolent Fund initiative to set up
dialysis units in government hospitals. An amount of Rs five crore has been
sanctioned from the fund to five medical colleges in state to set up dialysis units with
ten machines each. Rs 3.15 lakh will be spent for setting up dialysis units in the
district and taluk hospitals.

In October 2013,the Karunya Benevolent Fund, which provides financial assistance

to under-privileged people suffering from acute ailments and for palliative care, by
raising funds through Kerala Lotteries, extended to organ donors.

In October 2013, Government has decided to set up Karunya Homes in five

government medical colleges utilising the proceeds from Karunya lottery, where
those accompanying the patients could stay.

Government announced extended assistance to haemophilia patients under the

Karunya Benevolent Fund. It would not be limited to Rs.2 lakh and that the
government would provide further assistance to haemophilia patients for continuous
treatment, on the basis of hospital bills.

By December 2013, The Karunya Benevolent Fund has funded the medical
expenses of around 22,000 patients amounting to Rs2.86 billion.

In January 2014, the government is planning to open 18 more outlets this year. The
pharmacies will be set up in the district and taluk level hospitals. When it was
launched it was planned to set up 35 outlets and so far 16 pharmacies have been
opened.

7. Few Beneficiaries

PT Viswanath (44)
An auto rickshaw driver was diagnosed with cancer of the intestine. He was only 43.
He was about to sell his auto rickshaw to pay for the initial treatment but then came
to know about Karunya. He got Rs 1.4-lakh grant from the Karunya Benevolent
Fund in 2012.

Razia (45)
A homemaker from Kollam had a heart problem and was advised a surgery. Karunya
underwrote her medical expenses to the extent of Rs 1.5 lakh.

Santha P K(41)
A homemaker from Thrissur had heart disease. Karunya underwrote her medical
expenses to the extent of Rs 1.6 lakh in February 2013.

8. Lottery as a Social Tool

Lotteries have been banned in some states as it is cited as a speculative game in which the
poorer sections of the society spend their money. According to Babu Kallivayalil, member,
central council, Institute of Chartered Accountants of India, schemes like Karunya are
welcome as they bring a part of the money back to the poor people and It is a good scheme
through which the profits of the lottery are used for a social cause
The lotteries department is ramping up its publicity machinery to spread the message that
buying a lottery ticket is a philanthropic activity. The department has in association with
10

Kerala's film fraternity launched a high profile advertisement campaign to make lotteries
appealing even to the higher income groups. Promotional films featuring leading film stars
in Malayalam such as Mohanlal, Kavya Madhavan, Menaka Suresh and Manoj K Jayan
among others appeal to the people to buy Karunya lottery as it is for a good cause.

Conclusion
The key story in this model is the law of large numbers being effectively used to provide a
high degree of health security to the poorest populations of the world. This is not a new
story, to be sure. The key innovative aspect is the success in mobilizing these large numbers,
who are geographically dispersed. The existing organizations and government that connect
people must be drafted as a means through which health security can be introduced. The
transferability of schemes like this depend almost entirely public private participation and
the existence of health care infrastructure of a reasonable kind.

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vision2030 www.kerala.gov.in

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