Wednesday, August 17th, 2022 18:05:14

Recalibrating Public Expenditure on Health

By Sarat C. Das
Updated: May 2, 2022 1:10 pm

India’s public spending on healthcare was 1.4 per cent of GDP before the pandemic. It compares poorly to 5 per cent by China and Russia, 8 per cent by South Africa, and some 9 plus per cent by Brazil. These are the BRICS economies we are always benchmarked to, for the reason of sharing common maladies of large economies burdened by explosive population, untold poverty and massive income disparities. Even our neighboring countries like Bangladesh and Pakistan have over 3 per cent of their GDP funneling into their public healthcare system. A thickly populated country such as Indonesia, the government’s spending on healthcare is twice more than India, despite the country recently slipping from the position of upper-middle income to lower-middle income status.

According to the National Health Profile 2019, India’s per capita public expenditure on health in nominal terms is INR 1,657 (2018-19), which is much lower than countries like Sri Lanka. The Emerald Island declared bankruptcy now, where the scheduled exam was postponed indefinitely due to printing paper shortage, yet the country’s public expenditure on healthcare is soaring three times more than India.

In the pandemic year, because of mass death and public healthcare crisis, the central and state governments’ budgeted expenditure on the health sector reached 2.1 per cent of GDP in 2021-22. Health spending is made up of government expenditure, out-of-pocket payments (people

paying for their own care), and sources such as voluntary health insurance, employer-provided health programmes, and activities by non-governmental organizations. Despite the Economic Survey 2020-21’s recommendation to increase the public spending on healthcare services to 3 per cent of GDP the ebbing of the pandemic is not making a strong case for the same.

India’s doctor-population ratio is 1:834, assuming 80 per cent availability of registered allopathic doctors and 565,000 Ayurvedic, Unani, Siddha and homeopathic doctors, according to Union minister of health and family welfare Mansukh Mandaviya’s recent statement in the Parliament. Not long ago, according to the 15th Finance Commission, an allopathic doctor in India was found to be catering to 1,511 people, abysmally off the mark in accordance with the suggested ratio of WHO’s norm of one doctor for every 1,000 people. As per information available, there are 13,01,319 allopathic doctors registered with the State Medical Councils and the National Medical Commission (NMC) as on November, 2021. Acknowledging the fact that Unani, Siddha and homeopathic are not part of universal healthcare across geographies the allopathy stands out to be a more appropriate yardstick.

The shortage of trained nurses is even more dire, with a nurse-to-population ratio of 1:670 against the WHO norm of 1:300. Kerala has the best numbers, with 111 people per trained nurse, while Jharkhand is last with 4,019. The shortage is due to uneven rural-urban distribution. Public health/hospitals being a state subject, the primary responsibility to ensure availability of doctors in public health facilities lies with state/UT governments. Indian Nursing Council (INC), the apex body for nurses, recommends at least one nurse for eight patients in a ward, one for three in post-operative units and recovery rooms and one

for every patient in critical and intensive care units.India has traditionally spent less on health, 90 per cent of government expenditure being on the revenue side. In the First Five-Year Plan, 3.4 per cent of the total plan investment was for health outlays. This rose to 6.5 per cent  by the Eleventh Five-Year Plan. In FY 2020, the per capita capital expenditure was less than INR 200 per person, with 12 states spending under 1 per cent of GSDP on healthcare.

The National Health Policy of 2017 recommended government expenditure on health to be increased to 2.5 per cent  of GDP by 2025, but this target is now regarded to be a health unicorn. In the year 2017, the country needed to increase its health budget by 0.35 per cent each year to achieve the ambitious target. The country did far worse than expected. Between 2015-16 to 2020-21 the country has witnessed a mere increase of 0.02 per cent in the health budget.

The total per capita government spending on healthcare has nearly doubled from INR 1,008 per person in FY 2015 15 to INR 1,944 in FY 2020, but is still ridiculously low. The total expenditure by the Centre and states for FY 2020 was INR 2.6 trillion, or 1.29 per cent  of GDP, including establishment expenditure comprising salaries, gross budgetary support to various institutions and hospitals and transfers to states under centrally sponsored schemes such as Ayushman Bharat. Of the total public expenditure, the Centre’s share is 25 per cent. Over the last five years, the total public expenditure on health has risen at 15 per cent CAGR, much of this due to pay hikes.

The International Monetary Fund in its annual Article IV reports that India can boost its human capital’s productivity by investing in education and healthcare. In 2018, it identified poor public health as the 12th most important hurdle for ease of doing business, ahead of crime, tax regulations and policy instability. Health and working conditions are a key recommendation in its suggestions for labour market reforms. The health sector creates both high- and low-skill jobs and can be used for pump-priming the service and manufacturing sectors.

More egregiously than the government spending on healthcare is the access to public healthcare where India is found to be appallingly lagging. The Healthcare Access and Quality Index released according to the medical journal Lancet in 2018, India ranked 145th out of the 195 countries in terms of quality and accessibility to healthcare, much lower than countries like China (48), Sri Lanka (71) and Bangladesh (133). The healthcare professionals across Indian states are so unevenly spread, or even in some cases so difficult to access, we are dismayed with the purpose of this data. The population per allopathic doctor varies widely, ranging from 380 in Goa to 17,060 in Nagaland. The shortfall of nurses is highest in Bihar, Jharkhand, Sikkim, Telangana, Uttar Pradesh and Uttarakhand.

One of the primary causes of this uneven distribution of doctors across Indian states can be attributed to the concentration of medical colleges and facilities. Seats in medical colleges are highly skewed across states, with two-thirds of all MBBS seats in the country concentrated in seven states (Tamil Nadu, Kerala, Andhra Pradesh, Telangana, Karnataka, Maharashtra and Gujarat).

India is estimated to have a total of 18,99,228 hospital beds (over 60 per cent of which are in the private sector), that is, roughly 1.4 beds per 1,000 population. This is lower than in many comparator countries: China’s bed density exceeds four per 1,000; Sri Lanka, the United Kingdom and the United States have around three per 1,000; and in Thailand and Brazil, hospital beds exceed two per 1,000 persons.

India can raise its supply—8.5 hospital beds and 8 physicians per 10,000 people—to the standards of Japan and South Korea: over 100 beds per 10,000 people. For this, a specially designed fiscal stimulus needs to be funnelled into public health and policy logjams cleared so that the health sector becomes the engine of GDP growth. Subsidized loans, earmarked land, single-window approvals, tax holidays, together with a few other measures can be adopted for making medical devices and drugs and setting up hospitals and dispensaries.

India has a three-tier system: the sub-centres, primary health centres and community health centres (CHC), together make up the first rung of the health system. The 15th Finance Commission found that there was a significant shortfall in the number of centres required, ranging from 23 per cent for sub-centres to 28 per cent for PHCs to 37 per cent for CHCs. There is a severe deficit of public health facilities in Bihar, Jharkhand, Uttar Pradesh and West Bengal.

Low investment, sharp inter-state variations in the availability of health infrastructure and in health outcomes, supply side problems of doctors, paramedics, hospitals and inadequate number of healthcare centres like primary health care centres, sub-centres and community health centres are some of the structural challenges that exist. Consequently, the 15th Finance Commission revealed that about 70 per cent of outlay on health is Out-of-Pocket-Expenditure (OOPE), one of the highest globally.

Srinath Reddy, President of the Public Health Foundation of India and member of 15th Finance Commission, said in a public statement; “The foremost lesson that this Covid-19 pandemic teaches us is that a healthcare system that is insufficiently resourced and suboptimal in performance cannot create a strong and swift response when challenged by a public health emergency. Even if it mobilises resources on a war-footing, there is an opportunity cost to pay in terms of many other health services suffering neglect. And an efficient and equitable health system cannot be developed without adequate public financing. The commitment to deliver universal health coverage by 2030 is based on fulfilling the promise of raising public funding on health to at least 2.5 per cent of the GDP from the present 1.2 per cent  by 2025 as promised by the government, or even earlier as urged by public health experts. About 70per cent  of this has to be allocated to primary healthcare.”

Not surprisingly Global Health Security Index 2021 has India ranked at 66th. According to this Index, India’s detection and reporting procedures have improved over the last two years, but there has been little to no enhancement of its prevention protocols, health system or rapid response processes. Notwithstanding the fact that the global health security may be debated depending on what are

the various components one wishes to measure and integrate into a composite metric. K Srinath Reddy, an epidemiologist and president, Public Health Foundation of India (PHFI), questions: ‘’Is it about espousing the cause of health promotion and disease prevention alongside universal health coverage through a continual supply of services assured by an efficient and equitable health system? Or is this about a restricted and defensive construct that prepares nations to predict, prevent and promptly respond to acute threats that may periodically arise.

The current description of global health security, as adopted by the WHO, focuses more on the latter. It is defined as “activities, both proactive and reactive, to minimise the danger and impact of acute public health events that endanger people’s health across geographical regions and international boundaries”. The current Covid-19 pandemic exemplifies such a threat to global health security.

A large part of effective health governance is the country’s ability to prevent mass inflicting diseases which can acquire epidemic proportions. Hence, the focus is on the robust disease surveillance system and disease-combating preparedness and effective prevention measures.

When government spending on health increases, people are less likely to fall into poverty seeking health services. In low- and middle-income countries, WHO reveals that more than half of health spending is devoted to primary health care. Yet less than 40 per cent of all spending on primary health care comes from governments. This underscores the role of the government’s expenditure on healthcare.

The Economic Survey 2020-21 observes that the health of a nation depends critically on its citizens having access to an equitable, affordable and accountable healthcare system. It is also a common knowledge that the life expectancy in a country correlates positively with per-capita public health expenditure. Since India has one of the highest levels of OOPE in the world, this is contributing directly to the high incidence of catastrophic expenditures and poverty. In addition, OOPE for health massively increases the risk of vulnerable groups slipping into poverty because of catastrophic health expenditures. This is certainly not contributing to our goal of creating an equitable society. Hence, it is all about substantially increasing the share of government health expenditure in the total GDP and ensuring it percolates to those who need this most.


By Sarat C. Das

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