Healthcare needs continue to cause financial hardship to people across India. The National Health Accounts 2014-’15 report reveals that more than two-thirds of total spending on health (67%) is household out-of-pocket expenditure. The report tracks how much money is spent on health and how money flows from households or governments and eventually reaches the hospitals and dispensaries.

Public spending on health, as per National Health Accounts, declined from 1.15% of GDP in 2013-’14 to 1.13%. Out of every Rs 10 spent on health, Rs 4 is spent on medicines, purchased mostly by households from retail pharmacies. Expenditure on medicine alone pushes 34 million people into poverty every year.

Investment on preventive and public health is alarmingly low – only one-tenth of total spending goes to preventive care like disease control programs and immunisation. Given the resurgence of many communicable diseases like malaria, kala azar, recurrent epidemics of dengue and cholera and increasing burden of communicable diseases, it is high time that public investment is increased to strengthen the public health system.

NPISH: Non-profit sector serving households, which includes spending by NGOs; Enterprise: Firms spending on health for workers; VHI: Voluntary Health Insurance; Social Insurance: Schemes where mandatory deduction from salaries and wages along with contribution from employers are used to fund health care.
NPISH: Non-profit sector serving households, which includes spending by NGOs; Enterprise: Firms spending on health for workers; VHI: Voluntary Health Insurance; Social Insurance: Schemes where mandatory deduction from salaries and wages along with contribution from employers are used to fund health care.

India also lags on public and private health insurance with only 33% of the population opting for schemes that allow for risk pooling, which brings people with various health risks into one scheme to ensure that people are not discriminated against based on their healthcare needs. Similarly very few people prepay into insurance schemes in anticipation of possible health expenses. Prepayments are often much lower than healthcare costs and ensures that people are not denied care because of financial constraints.

Contrary to commonly held notion, along with social insurance and private voluntary insurance, government tax-funded programmes also have features of both risk pooling and prepayment. Globally, governments have invested heavily on health to expand risk pooling and prepayment mechanisms to reduce household burden.

Is low public spending a global phenomenon?

No. Worldwide, governments acknowledge their responsibility to pay for the healthcare needs of their citizens. Countries have adopted diverse strategies to this goal of assuring health for all. Most countries either provide care directly through public-funded health systems or through social insurance or a combination of the two. High income households often top up their healthcare needs through out-of-pocket payments or insurance mechanisms.

As a result, the vast majority of people are protected from the financial consequences of seeking healthcare in developed and many developing countries. As depicted in figure 2, as public spending on health as a percentage of GDP increases, out-of-pocket expenditure as a percentage of total health expenditure decreases. Thus financial protection of citizens improves. India rests at the top left corner of figure 2, depicting low public spending and low financial protection.

Public spending on health in India is among the lowest in the world when compared in terms of share in GDP and per capita spending. Some developing countries like Brazil, Chile, Costa Rica, Cuba, Colombia, Thailand, Malaysia and South Africa, which have made significant efforts in the recent past towards provisioning of universal access to health, spend much higher proportions of GDP on health. Governments in neighbouring countries like Sri Lanka, China and Nepal can mobilise more resources towards health than India.

Per capita public investment on health in India is almost at the same level with the average of the low income countries and is much lower than the low middle income countries. Countries like Brazil, Thailand and South Africa that have recently attempted to universalise healthcare have stepped up public spending on health to between 3% and 5% of GDP over a decade or so.

How can we change this situation?

The only way to change things is to augment public spending in a manner which is sustainable and strengthens health system in the long run. Strengthening preventive and primary healthcare, improve procurement and distribution system of essential commodities like medicine and deploying skilled human resources at appropriate levels could be pointers in that direction.

The National Health Policy 2017 had indicated an expansion of public spending on healthcare to reach 2.5% of GDP by 2025. If GDP grows by 10% per annum in nominal terms during this period, the centre and states have to augment their allocations at least by 24% in the same time, thus doubling every three years to adhere to this commitment. A latest Reuters report says health budget is expected increase by 11%, much below what was demanded by the Ministry of Health and Family Welfare. According to senior officials with the health ministry, such meager allocations will not help in realising some of Finance Minister Arun Jaitley’s commitments from last year – most notable among them being the idea of Health and Wellness Centres at the grassroots level – and hamper progress of National Health Mission considerably. There is supposed to be one such centre for every 5,000 population, replacing sub-centres with expanded preventive and primary care, along with facilities to distribute essential medicines.

The idea of having grassroots Health and Wellness Centres is a noble and much needed one that must be implemented properly. Expansion of preventive and primary health care and particularly for non-communicable diseases can help in big way to increase access and provide financial protection to poor and vulnerable. In order to make the program effective, the government need to ensure steady supply and dispensing of medicines from the Health and Wellness Centres. Free medicine initiatives in Tamil Nadu and Rajasthan have demonstrated how through effective centralisation of medicine procurement and decentralisation of distribution, with demand-driven budgetary allocations, steady supply of medicines can be ensured in public facilities. Expansion of free medicines initiative remains only in budget speeches, without much happening in terms of allocation and implementation.

It is high time that the finance minister takes his own budget commitments to healthcare seriously and back them up with adequate financial resources in the Union Budget 2018.

The writer is an Assistant Professor at School of Government and Public Policy, OP Jindal Global University.