Saturday, November 16, 2013

Health Financing in India

Health Financing in India - Indranil

A tale of political apathy, plunder and catastrophe

Failure to achieve national and international targets and goals has now become quite routine affair for the policy makers in India.

‘Health for All by 2000[1]’ remained on paper, got dropped unobtrusively when economic reforms were embraced ceremoniously, meanwhile the health situation became bad to worse for majority of Indians. The Millennium Development Goals, which were comparatively more suitable to neo-liberal agenda replaced “Health for All”. As things stand today, maternal and child health related Millennium Development Goals[2] are also going to remain unachieved in India. Being the largest contributor to global burden of maternal and child deaths, slow progress in India is likely to impede the global progress. Without making any critical assessment of failures to achieve the MDGs, international agencies are gearing up to set the sustainable development goals (SDGs) during the post-MDG phase. The most important health related aspect under proposed SDGs is the idea of Universal Health Coverage (UHC). Under UHC governments are being seen as a major purchaser of health services (and not the provider or only provider) and different forms of purchasing mechanisms are proposed including tax financed health insurance, mandatory social insurance and managed care model. Here is a brief attempt to look at the health financing situation in India and critically reflect upon the idea of UHC in order to understand the political economy behind the urgency to implement UHC.
Public investment trends: a reflection of political apathy
The idea of universal health care is not new in India. The Bhore Committee report (1946), which provided the blue print for the public health system, sought to create a health system in which all Indians would have access to affordable health services. Massive investments have been made in building a vast network of government funded and staffed clinics and hospitals during 1970s and early ‘80s. Since 1990s, through the introduction of economic reforms, public investment on health, which was already very low, was cut back significantly. Chronic under-investments lead to crumbling of public health infrastructure, under-staffing and poor quality of health services (Indranil & Trisha Aggarwala 2009)[3]. The level of public investment on health in terms of its share of GDP signifies the priority accorded to health by the respective governments. Compared to the developing country average of 2.5 percent of GDP as government expenditure on health, India spends only about one percent – a level among the lowest in the world[4].
The relationship between investments in health with health system is like that between cloud and rain- investments are necessary for creating a good system, but may not be sufficient to ensure good health system to follow. A health system may not be able to ensure equity, universality and efficiency even if it is heavily financed, if prominent market failures are not addressed. United States remains the most glaring example, with more than a sixth of GDP going towards health care, yet leaving fourteen million people out of coverage. Some developing countries like Brazil, Chile, Costa Rica, Cuba, Colombia, Thailand, Malaysia, South Africa, which have made significant efforts in recent history towards provisioning of universal access to health, spend much higher proportions of GDP on health than India. Governments in neighbouring countries like Sri Lanka, China, and Nepal could mobilise more resources towards health than what was done in India. Per capita public investment on health, is almost at the same level with the average of the low income countries (LICs) and much lower than the low middle income countries (LMICs). Countries like Brazil, Thailand, and South Africa which have recently attempted to universalise have stepped up public spending on health to 3-5 per cent of GDP over the period of a decade or so (table 1).
Table 1: Public spending on health: Comparing India with some developing countries

General govt. expenditure on health as % of GDP*
General govt. expenditure on health as % of total expenditure on health
Per capita govt. expenditure on health
(PPP int. $)
Costa Rica
South Africa
Sri Lanka
Source: NHA, WHO
Market and its infirmities:
If the government does not pay for citizens’ health, people have to pay through their own pocket. Out-of-pocket payments are the most regressive forms of financing often leading to poverty and catastrophy. It impedes access to good quality care, causes untreated morbidity and untimely death or disability. The share of government expenditure in total health spending in India is only 17-20 percent. Only a few countries in the world have lesser government share in health spending – these include Myanmar, Burkina Faso, New Guinea and Pakistan. Thus, India has the most privatised health financing system in the world.
Health sector reforms were meant to boost private investments in health care. Indian state has not only ignored the agonies of people, it has adopted a multi-pronged approach to accomplish this- gradual withdrawal from providing health services, introducing user fees, cut backs in public spending on health, privatisation and commercialisation of existing facilities and services, provision of subsidised land and other incentives to systematically help private sector grow. Increasing domination of private sector in service delivery led to high dependence of people on their own means to manage health care expenses; prolonged deprivation of a large section of population from any access to modern health care system and uncontrolled escalation of profits of the private sector and especially the corporate hospitals are testimony to the “success” of so-called reforms.
During the early 1980s private sector in India largely comprised of individual practitioners, both qualified and unqualified, essentially providing primary level, outpatient care of extremely variable quality across urban and rural areas in the country (Jesani and Anantharam, 1990; Baru, 2003)[5],[6]. The growth of secondary and tertiary hospitals was relatively new phenomenon, limited to metro cities and few affluent rural pockets of the country. Like every other sector of the economy, growth of organised and advanced capitalist forms of production requires state support in different forms. The case of health sector is no different.
In the 1980s, when medical care was gradually opened up to private sector and public private partnerships (PPPs) were made part of national strategy (GoI 1983)[7], the idea was to help market grow. Introduction of neo-liberal reforms in the 1990s accelerated the process. Continuous cutbacks in expenditure halted the process of expansion of government health services and reduced quality of care. A large and relatively affluent section of the middle class moved out of the government health services and formed the market base for organised private sector. This was supplemented by various forms of input subsidies including land, import subsidies on machinery and equipment, tax concessions. Large government investments made in medical education allowed private sector to access subsidised, cheap but good quality doctors. Freeze in government recruitments left little choice to the medical graduates but to join private sector or fly abroad. PPPs were expanded to channelise government revenues to provide further impetus to private sector growth.
But the consequences on people have been really debilitating. In the absence of adequate public spending, an increasing share of consumption expenditure is being spent to purchase health care. In 1993-94, around 3-4 percent of household spending was going for health care (NSSO 50th round)[8]. The latest round of NSSO consumption expenditure data for 2011-12 shows that 6.8 percent is being spent on health (NSSO 68th round)[9]. Increased spending on health is likely to be mobilised by sacrificing some other essential items like children’s education, selling assets or borrowing. Morbidity and mortality pushes people into poverty and destitution also. This works in several ways, if the ill person is also an earning member, since he or she remains out of work, family earning suffers; at the same time spending on health care also pushes household expenditure below poverty line. As per NSSO data around fifty million people were pushed into poverty due to out-of-pocket spending on health. Over the last two decades the number has almost doubled.

Figure 1: No of people falling below poverty due to out-of-pocket spending on health.

Source: authors’ calculation based on NSSO unit records, various rounds.
Health in the political map: some recent developments
The health financing scenario in India is a clear reflection of the class biases of the ruling elites. It represents complete lack of sensitivity of the ruling class towards the suffering of millions of people and also complete submission to interest of profit. Throughout world people have achieved their health rights through protests and political movements. Health hardly figures in the political agenda of governments in India. At the same time, whenever some progressive political atmosphere evolves, significant breakthroughs have happened in health care delivery. During the late 1970s, health was quite central to Minimum Needs Program and considerable investments were made. When the United Progressive Alliance came to power in 2004-05 with a progressive political plank and out-side support from the Left, it embarked upon the task of rebuilding rural health services and National Rural Health Mission (NRHM) was launched. During the initial years of the NRHM considerable investments were made. Till date, Union Government has invested around Rs83000crores in strengthening the public system, providing additional human resources and in providing financial incentives to access government health services in rural India. However, as the progressive outlook of the ruling UPA faded over the years, so did the funds for NRHM. Overall, NRHM could arrest the decline in spending but didn’t lead to any significant improvements.
Almost parallel to NRHM, several states embarked upon states sponsored insurance schemes. The first one to draw attention of political class was the Rajib Arogyashree Scheme of Andhra Pradesh, which became quite popular among people and apparently helped the Congress government to get back to power. Several states and Union government followed Andhra model and introduced their own insurance schemes. Experience of RAS in Andhra Pradesh shows that most of these funds flow to private hospital and tertiary care. At the same time primary and secondary level care funds are getting squeezed. Moreover, the growth of private hospitals, in part fuelled by the substantial insurance funds available, has increased their demand for skilled human resources.  This private sector demand will likely to add to the growing migration of skilled staff from government to private hospitals.
The UHC agenda:
The impact of NRHM as well as the insurance schemes in providing financial risk protection has remained largely limited. The main reason is that most of the OOP happens in out-patient care and especially on drugs.[10] As per the latest NSSO data, two-third of total OOP is on medicines. The insurance schemes are largely for hospitalisation, which account for only a fifth of total spending by people. On the other hand, though NRHM has strengthened maternal and child health related care in rural India, and as a result more people are accessing public service than before, but drugs are not being provided free from government hospitals. Barring few states like Tamil Nadu, Kerala and recently Rajasthan, people need to purchase medicines from market, even if they access public hospitals.
Under the XII Five Year Plan, we find a renewed call to increase public spending to around 1.87 percent of GDP from the current level and to move towards a Universal Health Coverage framework. The Planning Commission had set up an expert group called the High Level Expert Group on Health (HLEG),[11] which provided some crucial policy directions for increasing public spending. The HLEG had some progressive recommendations and as well as left some crucial loop wholes. It suggested that enhanced public spending on health to 2.5 per cent of GDP should be largely devoted towards strengthening public systems. It also recommended against insurance mechanisms and called for bringing different government insurance programmes under the same umbrella. It rejected insurance sighting the evidence that bulk of out of pocket expenses was in out-patient services and on drugs and diagnostics. Instead the HLEG suggested that a national health package would be provided as a guarantee to all citizens and services would be jointly provided by the public sector and the private sector. It suggested two models to engage private sector, one is a ‘coordinated care model’ based on public provisioning complemented by contracted in private sector; the other is more like a ‘managed care model’ where private and public facilities would be part of a network to provide health services to empaneled citizens. The final health chapter of XII Plan has proposed that two UHC models would be piloted in different districts and States would be provided incentive funds for the proposed National Health Mission (NHM) to take up the pilots[12].
One may find the ideas of increasing public spending to 2.5 per cent of GDP an important pre-requisite, and eradication of out of pocket expenditure extremely essential, there are certain important contradictions between the goal and the design, which needs to be highlighted. To start with, eradication of out-of-pocket spending is a narrow goal, it should rather be one of the key strategies to achieve ‘health for all’. This distinction becomes important because the goal drives the strategy. Universal health coverage and health for all mean entirely different things. While ‘health for all’ pre-requisites a progressive socialization of health care, gradual undoing of commoditization of health care, primary health care approach integrated under the notion of social determinants; universal coverage merely means that a financing system is developed to cover majority of people against out of pocket expenses but provisioning is done essentially through market.
The noble objective of PC to curtail cost, ensure equity, continuum of care and rational use of technology would necessarily fall apart because of contradictory design- a design based on privatisation that is being pushed by the given global order and the class composition of the present national Government. The pre-requisite of strong public sector in ensuring greater access has been demonstrated in all kind of contexts- from the most developed countries like UK, Sweden, middle income countries like Costa Rica and Chile or developing countries like Cuba, Sri Lanka, Thailand, and Brazil etc. Like all other Plans, PC has retained the rhetoric of strengthening public sector and at the same time paved the way for further monopolisation by the private sector. These tendencies if not halted will overpower the entire agenda of Alma Ata towards its design.
This may require bringing qualified general practitioners from various systems of medicine into the public fold before they get completely integrated into the medico industrial complex. Experience of initial decades of NHS shows that the GPs can provide cheaper services, can be regulated, rational treatments can be ensured through them and most importantly indirectly curb the growth of tertiary hospital sector. The political context under which such radical transformations had happened in UK was vastly different from the neo-liberal regime that we are living in. The strength of progressive political and civil society movements would be tested at such a juncture. Whether it can really push the agenda towards rebuilding public provisioning based on Primary Health Care approach or allows the vested interests to make use of public money to further the interest of profit and greater downfall of public sector is to be seen in the days to come. Small ray of hope is seen in the provisioning of free drugs in public sector. An entitlement which was unobtrusively dropped during the era of liberalisation may now bring patients back to public facilities and create demand for better services.
However, the battle to rebuilt public sector in a Primary Health Care approach cannot be fought in isolation and in current context of neo-liberalism possibilities of rejuvenating government health services are really bleak. Under the present regime, where exploitation of labour is taking place in most advanced and pervasive form, state still plays its role in generating demand. But only in a manner which doesn’t interfere in the process of production or price setting. That is why artificial means of demand generation like cash transfer, voucher schemes, insurance and other market guarantee schemes are promoted; which allow market to operate freely and make plunder over peoples’ money. That is why health care, food and nutrition, water services are packaged and epitaph of universal and comprehensive public provisioning is written in unprecedented hurry.

[1] WHO (1981)
[2] The fourth Millennium Development Goal calls for a reduction in under-five mortality by two thirds between 1990 and 2015. Similarly, UNDP (2000)
[3] Indranil & Trisha Aggarwala (2009): Safe-motherhood, public provisioning and health financing in India; Report, Centre for Budget and Governance Accountability, New Delhi
[4]WHO (2009): World Health Statistics
[5]Jesani, A and Anantharaman S (1990):“Private Sector and Privatisation of Health Care Services: A Review Paper” for the ICSSR-ICMR joint panel on health, Foundation for Research in Community Health, Mumbai.
[6] Baru, R. (2003), “Privatisation of Health Services: A South Asian perspective”, Economic and Political Weekly, 38(42) pp. 4433-4437.
[7] GoI (1983): National Health Policy, Ministry of Health and Family Welfare , New Delhi, India
[8] National Sample Survey Organisation (1993-94): Consumer Expenditure Survey 50th Round, Ministry of Statistics and Programme Implementation, Government of India, New Delhi.
[9] National Sample Survey Organisation (2011-12): Consumer Expenditure Survey 68th Round, Ministry of Statistics and Programme Implementation, Government of India, New Delhi.
[10] Sakthivel S and Karan A (2012): Why publicly financed health insurance schemes are ineffective in providing financial risk protection. Economic and Political Weekly; 47(11):60-68.
[11] Planning Commission (2011). High Level Expert Group Report on Universal Health Coverage in India. Submitted to Planning Commission, New Delhi, India
[12] Planning Commission (2012): XII Five Year Plan: Social Sector; vol II, Government of India, New Delhi, India

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