Health Sector
Insurance For All

By Bachchu Kailash Kaini

HEALTH insurance is an important factor to be considered for the overall development of the health system in any country. Alternatives to government budget allocations for financing health services are required to meet the demand of the entire population.

Policy

Efficiency, equity and revenue collection should be the objectives of a health financing policy. Problems of efficiency and equity in the delivery of hospital services and insufficient funds for recurrent operating costs have to be emphasised to solve the health related problems. Health financing policy can contribute to improved equity and efficiency of services use and improved funding or, if ill considered, can contribute to a worsening of these problems. Efficiency, equity and revenue collection, thus, are criteria by which the performance of a financing policy can be assessed.
Insurance provides the means by which risks, or uncertain events, are shared between many people. Premiums are paid to an insurance company which compensates any insured victim of the event for any financial loss resulting from the event. Insurance, therefore, helps to lessen and spread risks, and it relies on the fact that what is unpredictable for an individual is highly predictable for a large number of individuals. It follows that for insurance to be feasible, there must be enough individuals insured to spread the risks widely, and the uncertain events must be relatively independent of each other.
Insurance inevitably has redistributive consequences, their nature and magnitude depending on the financing of the schemes and the way in which premiums are assessed. Because the occurrence of the event being insured against is uncertain, some participants will draw out more than they pay in, thus resulting in redistribution from the healthy to the sick.

The introduction of health insurance in either its private or social form in our country is likely to carry with it certain implications for the efficiency and equity of the health care system. The potential for expanding the health sector through increased government finance is likely to be very limited in our country, even if the initial cost is relieved by external aid. The tax, base is often very narrow, consisting largely of indirect taxes such as customs duties and receipts from direct taxes such as income tax are typically low. Some form of health insurance, requiring contributions by individuals and/or employers, often appears attractive to a health sector starved of funds and doubtful of getting revenue from other quarters.

Health insurance can be financed and organised in a variety of different ways. It can be purchased by an individual or group through the private market, from either profit or non-profit firms, and under these circumstances is conventionally termed private or voluntary health insurance. Health care itself would usually be delivered by independent providers, but sometimes by facilities owned by the insurer. The level of an individual's premium would be based on the actuarially determined likelihood of illness of that

individual. In Contrast, group insurance is often based on a firm or cooperative, and the premiums related to the risk of the group of employees.

An individual's demand for private health insurance will be determined by factors such as the price of insurance, that is the premium to be paid; individual's assessment of the probability of loss resulting from illness, the likely magnitude of that loss; his/her income and most especially the degree to which s/he is risk averse.

It is likely that if individuals left to purchase the health care they want with the income available to them, some would be unable to afford what would be considered an appropriate amount. Moreover, the purchasing power of poor communities may be inadequate to attract health practitioners and facilities. The problem comes in while determining how to move towards a different distribution of health care consumption than that which results from free market forces. Furthermore, once income transfers are made to subsidise consumption, attention has to be given not only to who is consuming health care but also to who is paying.

The organisation of health insurance on a public does not necessarily ensure in equitable system. Even if social insurance covers both high and low wage earners, utilisation patterns will not necessarily be proportional to health need.

The majority of working populations in our country are either self-employed or work for small enterprises in agricultural sector, wages are typically low and employment unstructured. In the urban informal sector, wages are low and may be received in kind rather than cash and may be spread over a larger number of economically inactive household members. When, as is often the case, small scale agricultural or industrial producers face prices set by the market which they cannot influence, they may be unable to pass on the cost of insurance to consumers, and any payroll tax may threaten their financial viability. Moreover, the per capita cost of health care in rural areas is likely to be higher than in urban areas, requiring larger payments for the same level of services, and an administrative structure that can be used for the collection of contributions may not exist. In such a case, the extension of social insurance is challenging and government has to be serious to provide the health insurance to the entire population of the country.

There are, however, a number of ways in which either compulsory or voluntary insurance schemes could be set up to include rural populations. Rural health insurance scheme could be financed through local household taxation and state subsidies. A nominal amount of tax on the value of agricultural products sold could be paid to local hospitals, which in return admit rural workers and their dependents as 'insured person.'

Value

Finally, the value of insurance, as a principle, providing protection for the individual against the cost of illness, is clear. Beyond that principle, the value of an insurance system depends on its effect both as a source of funds and as a way of organising the provision of health care.

Tax Proposals Of Indian Budget

By Rup Khadka

INDIAN Finance Minister Mr. Jaswant Singh presented the Budget for the fiscal year 2003/04 to the Parliament on February 28, 2003. The budget has proposed to introduce Value Added Tax (VAT) at the state level from April 1, 2003. It is considered as historic reform of domestic trade tax system, which will assist the state governments to transit successfully from the erstwhile sales tax system to modern domestic system.

Fear

As VAT will be levied on most of the goods and services and extended right through the retail level, its base would be broad and the revenue is likely to increase substantially. But some states have not been convinced, which fear that revenue may decline. In response to this, the central government has agreed to compensate 100 per cent of the loss in the first year, 75 per cent of the loss in the second year, 50 per cent of the loss in the third year of the introduction of the VAT.

As India has adopted a federal system, there is a need to make adjustments in the tax jurisdiction of the central and state governments in connection with the introduction of VAT. For example, an amendment to the constitution is proposed, which would give the central and the state governments sufficient powers to collect the proceeds on services. Similarly, central sales tax will be phased out with the implementation of VAT at the state level. The ceiling rate of central sales tax for inter-state sale between registered dealers will be reduced to 2 per cent during 2003/04. The centre will compensate for any revenue loss from this change.

Furthermore, additional excise duty, which is levied by the central government on taxtiles, sugar and tobacco products in lieu of state sales tax, is being amended, from a date to be notified. This will allow the State governments to levy tax on these three important products and integrate with the VAT.
Service tax has been introduced on 10 more services viz. commercial/vocational institutes, coaching centres and private tutorials, technology testing and analysis, maintenance and repair service, commissioning and installation service, business promotion and support service, Internet café and franchise services.

Similarly, service tax is extended to minor ports, multi utility vehicles (until now it has been levied only on authorised automobile service), all forex brokers. It is extended to proprietorship, partnership and other individual concerns providing banking and financial services, while it has till now been limited to service provided by banks.

The rate of service tax has been increased from 5 per cent to 8 per cent. However, credit of service tax paid on inputs services will be provided on all services in order to avoid double taxation.

Some changes have been introduced in the field of income tax also. For example, surcharge of 5 per cent has been removed from income up to Rs. 8.50 lakh while it has been increased to 10 per cent on income above Rs. 8.50 lakh. Five per cent surcharge will be halved in case of corporate assesses firms, foreign companies, cooperatives and local authorities.

Standard deductions for salary income up to 5 lakh have been increased to 40 per cent of salary or Rs. 30,000 whichever is less, which will be Rs. 20,000 for salary income above Rs. 5 lakh.
The tax rebate for senior citizens has been increased to Rs. 20,000. Their income up to Rs. 1.53 lakh would be tax-free. Pensioner will get Rs. 30,000 standard deduction also, meaning that their income up to Rs. 1.83 lakh will be exempt from income tax. In order to encourage voluntary retirement scheme, voluntary retirement payment up to Rs. 5 lakh will be exempted even when paid in installments.

A deduction of Rs. 50,000 for permanent physical disability and Rs. 75,000 for severe disability has also been proposed.

Education expenses up to Rs. 12,000 per child for two children will be made eligible for rebate under the income tax. The rate of deprecation for the life saving medical equipment has been increased from 25 per cent to 40 per cent.

Long term capital gains tax on listed securities has been abolished. Dividend tax has been modified into a dividend distribution tax, which will be levied at the rate of 12.5 per cent on domestic companies.

The peak rate of customs duties has been reduced by 5-percentage points, from 30 per cent to 25 per cent, except on agricultural and dairy products.

The rate of customs duties has been reduced on several items including specified life saving equipment, glucometers and glucometer strips unused by diabetics, liquor, grapes gold bars, polished diamonds, gemstones, information technology, textiles, tea, hearing aids, crutches, wheel chairs, walking frames, tricycles, broilers and artificial limbs, parts of hearing aids and wheel chairs, specified veterinary drugs, shrimp larvae feed, a number of capital good used by the telecom and information technology sector for manufacture of component and optical fiber cables.

In the field of excises, a three-tire excise rate structure of 8 per cent, 16 per cent and 24 per cent has been introduced. There are a few exceptions, however. Rates of excise duties have been reduced on several items including tyres, aerated soft drinks, air conditioners and components, cars, and textiles. Similarly, excise duties have been abolished on such items as bicycle and parts, utensils, glucometers and glucometer strips unused by diabetics, umbrellas, and toys.

Administration

Proposals relating to the reform of income tax administration include: out-sourcing of non-core activities of income tax department such as allotment of PAN and creation of data bank, system of random selection of 2 per cent of the returns annually on the basis of the computer generated intelligent, direct crediting of all refunds to the bank account of the taxpayer, through electronic clearance system, reduction in the number of income tax forms relating to furnishing of applications, returns, collection, tax deduction at source etc, introduction of a one page return form for individual taxpayers having income from salary, house property and interest, amendment of the income tax law to make electronic return filing possible and the abolition of the tax clearance certificate system. In connection with customs, self-removal procedures have been introduced for importers and exporters.

Of Students And Teachers

By Ambar Mainali

WE often talk highly about foreign universities and foreign degrees. There are genuine reasons that lead us to think that way. Natives returning to their homeland after studying abroad, especially in the US are somewhat different in the way they deliver their views and analyse the pros and cons of a particular problem. Going by the experiences shared with a couple of friends who have made it to the US, the teaching learning atmosphere in US schools and universities is a lot different compared to Nepal and other developing countries. Schools there have always given priority to the child centred approach of teaching. They are more concerned about what the child wants to learn or for that what the child is more curious about rather than trying to bombard the tender minds with flurry of information.

Children are allowed to interact freely, talk to each other and be involved in the phenomenon of sharing what one has learnt. There are no textbooks prescribed for those studying at the lower levels. The students are given access to a range of reading materials from which they can make their own choices. Corporal punishment is strictly prohibited. And children are given the opportunity to learn from their own mistakes. In totality, the US model of teaching aims to instill the confidence in the child and also grooms him/her to be accountable for one's deeds. The same model of teaching is being brought into practice in some of the emerging schools in Kathmandu. Rato Bangala School stands out in its efforts to impart education based on the child-centred approach. Other schools in Nepal are still following the traditional pattern of teaching and learning where the teacher is the boss and the students are helpless creatures who cannot look up straight into the eyes of the teachers.
A visit to the junior classrooms at Rato-bangala School impressed this writer a lot. The rooms did not have any desks and benches unlike in other schools. The classrooms with carpets on the floor are open for the students who can move around, mix up with their friends and share their ideas. This system of avoiding the desks and benches is advantageous in that students are allowed to mix up freely. Classrooms that have desks and benches always obstruct the phenomena of interaction between students. Only those sitting close are good friends whereas other sitting far apart are aliens to each other.

Now to talk about the exams, the Nepalese schools and universities excluding a few of them are still asking questions having the Ws, when, what, where and so on. It was quite stunning when this writer himself had to write an internal exam for MA Sociology. And it was quite unnerving to come across the question: Write an essay on social scientific research. Universities around the world have really grown by leaps and bounds as far as academic advancement is concerned. But in Nepal we are still limiting our self to classrooms where teachers proudly ask you to write essays and nothing else. One other instance worth recalling here refers to this writer's days as a science student. The teacher really made a frustrating remark saying, "Science students in advanced countries have started performing laser experiments in chemistry but you poor guys are still learning how to make methane gas in the lab".

Well we cannot think about having the same kind of atmosphere here in Nepal owing to many constraints that come on our way. But this does not necessarily mean that we have to follow the same old traditional method of teaching and evaluating the test papers. This writer has often seen teachers putting the marks in the answer sheets without reading the full answer. Those who can impress the teachers with flowery lines in the first two sentences get high marks and others who cannot do so are left to fail and curse themselves. All this clearly calls for a thorough review of our pattern of teaching in order to have a qualified manpower who can contribute to the nation building process.