Public healthcare efficiency in India: Estimates and determinants using two stage DEA approach

Nearly 400 million Indians (30 % of the total population) lack any financial protection for health which leads to very high out of pocket expenditure. In India more than 90 million people spend 10-25 % of household expenses on healthcare. This is a serious threat to Sustainable Development Goal 3, which aims at providing universal health coverage along with protection from catastrophic spending on health.

The aim of this paper is to estimate the efficiency and determinants of public health in India at subnational level.

To estimate the efficiency of public healthcare, input oriented bias corrected DEA model has been used. In this model life expectancy at birth and infant survival rate have been treated as outputs. Public health spending and per capita income are treated as inputs. In the second stage Tobit regression is used to analyse the determinants of efficiency.

The mean bias corrected efficiency score across Indian states is 0.60, implying that on average there is a 40 % inefficiency in public healthcare in India. Maharashtra and Mizoram are the most and least efficient states with efficiency score of 0.921 and 0.218, respectively. Fourteen states have efficiency scores less than 0.60, two states have efficiency score of 0.60 and 15 states have the efficiency score greater than 0.60. Socio economic factors outweigh the medical factors in determining the public healthcare efficiency in India.

There are 40 % inefficiencies in public health in India implying significant wastages in public health. By improving public health efficiency, there would be savings of 48 % in terms of government expenditure on health per capita. It will also improve infant survival rate by 27.19 % and life expectancy by 20.65 %.