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Healthcare financing in India

The growing out-of-pocket expenditure must be curtailed to enable a healthy society that is geared towards holistic development.

 Kavita Singh |  2017-12-07 16:43:46.0

Healthcare financing in India

Healthcare spending in India for 2014 stood at about 4.7 per cent of its GDP, which is 75 USD per capita. Of this, the Government Health Expenditure (GHE) is 30 per cent. A majority, 62 per cent of healthcare expenditure, is the household out of pocket expenditure (OOPE). Prepayments towards risk pooling arrangements or health insurance are low. Household premiums for private health insurance are three per cent of the Total Health Expenditures (THE). Social health insurance expenditures (which are included under the government health expenditures) occupy about six per cent of the THE.

The National Health Accounts for 2013-14 reports that the Government Health Expenditure is 3.8 per cent of the General Government Expenditures (GGE). Considering India's federal structure, the share of the state governments in government health expenditure is 66 per cent. About seven per cent of the government healthcare expenditure in India is derived from capital investments. India has the highest (62.4 per cent) amount of OOPEs as a percentage of the total health expenditure, when compared to other countries like Nepal (47.7 per cent), Sri Lanka (42.1 per cent), Thailand (11.9 per cent), Brazil (25.5 per cent), South Africa (6.5 per cent), Russia (45.8 per cent), China (32.0 per cent), United Kingdom (9.7 per cent) and USA (11.0 per cent). Bangladesh has a higher OOPE as compared to India.
If we look at the per capita total health expenditure, India spends the lowest (75 USD) after Bangladesh and Nepal. Other countries like the USA and the UK are spending as high as 9,403 USD and 3,935 USD respectively. In proportion to that, the Government Health Expenditure of 75 USD by India is merely 23 USD, whereas, USA and UK are spending as high as 4,541 USD and 3,272 USD, respectively.
Addressing High OOPE in India
A high out of pocket expenditures coupled with low government spending (1.15 per cent of GDP) makes India's healthcare financing highly inequitable. OOPE is the most inefficient way of spending and it leads to catastrophic health expenditures (CHE). To move towards reducing OOPE and providing affordable healthcare with good financial risk protection, the following steps are globally recommended:
Increasing government healthcare expenditures to 2.5 per cent of the GDP as envisaged in the National Health Policy 2017 and ensuring that a majority of the government spending is on comprehensive primary healthcare, drugs and diagnostics, screening of hypertension, diabetes etc.
Increase the proportion of healthcare expenditures through risk pooling arrangements or health insurance.
Why is it necessary to increase government spending on healthcare?
The government spending on health is of utmost importance as this is pivotal to effectively mobilising the resources for the health sector. This key element underpins a strong socio-economic solidarity among communities, which is essential to a health system. Without this, systems will be more dependent upon private funding sources, such as OOP spending and private health insurance—high levels of which are associated with inequity and poor financial protection, leading to an iniquitous and an unhealthy society. India is currently facing the same problem. India's Out Of Pocket Expenditure (OOPE) is over 60 per cent (rank 174/192 countries). Over seven per cent of the population slips below the poverty line due to health expenditures, while 27 per cent of hospitalised patients have had to sell their assets or borrow to finance their healthcare.
Furthermore, the massive private sector and OOPE dependency have led to deleterious health outcomes due to issues as 64 per cent of the THE is OOPE and the majority of the poor population faces catastrophic health expenditure depending upon the doctor's advice. There are several externalities e.g. TB, cancer etc., where private markets fail to provide services along with the necessary preventive, promotive, palliative, and rehabilitative health care that will require government intervention to be able to achieve satisfactory health outcomes.
India, with its rapid social and economic development, is undergoing a major epidemiological transition. Over the last 26 years, the country's disease pattern has shifted as mortality due to communicable, maternal, neonatal and nutritional diseases have declined substantially and non-communicable diseases and injuries are increasing, thereby contributing to the overall disease burden. India's health system, therefore, faces a dual challenge.
The burden of diseases such as diarrhoea, respiratory infections, delivery complications, neonatal disorders, and tuberculosis are reduced but it is still a high burden and MDG remained an unfinished agenda. At the same time, the contribution of Non-Communicable Diseases (NCDs) such as heart disease, stroke, diabetes is rising.
Funding to scale up the communicable and non-communicable disease interventions as 60 per cent of the death is due to NCDs, also known as lifestyle diseases. Addressing NCDs is the utmost priority of the Sustainable Development Goals (SDGs). To address the issue of NCDs, there is a need to engage with Comprehensive Healthcare by converting Sub Centers into Health & Wellness Centers.
The National Health Policy (NHP) 2017 aims to address the high out of pocket expenditure, low health insurance coverage, weak public health facilities, the dearth of infrastructure and the prevalent shortage of skilled professionals. It commits government health expenditure to reach 2.5 per cent of the GDP by 2024-25. The introduction of the National Rural Health Mission (now NHM) has increased the THE from 0.9 per cent of GDP in 2004-05 to 1.15 per cent of GDP in 2013-14, (27.7 per cent) over a decade.
However, the National Health Policy 2017 has envisaged the need to increase the healthcare expenditure from 1.2 per cent in 2017-18 to 2.5 per cent (108 per cent) over a period of seven years. This appears to be a herculean task. To obtain the goal of NHP 2017, the government needs to further increase the health expenditure of Rs 623663 crore by 2024-25, in tandem with the present growth rate. The New Health Policy also envisages the increase in state sector health spending to more than eight per cent of their budgets by 2020. There is a need to decrease the proportion of households facing catastrophic health expenditure from the current levels, by 25 per cent, by 2025.
"Sarve bhavantu sukhinah, sarve santu niramaya". Health is not only a goal in itself but it is also vital for improved developmental outcomes. Better health improves productivity and reduces economic losses due to premature death, prolonged disability and early retirement. Health and nutrition directly impact the scholastic achievements—bearing upon productivity and income.
In a nutshell, the need of the hour is an effective implementation of NHP for the improvement of the healthcare service delivery and to reduce OOPE substantially. There is a very strong case for investing more for achieving health for all through universal healthcare.
(The writer is Director, Finance, Ministry of Health & Family Welfare, Government of India. The views expressed are strictly personal.)

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