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A Temporal Analysis of India’s Public Health Expenditure

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Unlike China or the United States, identifying India’s healthcare model can be a tedious task for researchers. Presently, India ranks 179 out of 189 countries when measured for health prioritisation, similar to nations like Haiti and Sudan that are largely dependent on aid. Consolidated public health spending (Centre and states) stands at just over a percent of GDP. An abysmal estimate for a nation of India’s size. The burden of out of pocket expenditure (OOPE) in India is the heaviest. In 2011-12, 55 million people were pushed below the poverty line due to OOPE.If consolidated public spending is increased to a mere 3% of GDP, India can halve its OOPE.This insistence on a public spending hike is also rooted in market failure when it comes to healthcare. In developing countries like India, the demand for healthcare outpaces its supply. While ideological assumptions may argue that private healthcare markets struggle with misplaced incentives when catering to the economically vulnerable, research suggests that private health spending does not have the potential to increase at the required rate in low income countries. Further, public spending responds much better to increased demand for healthcare in financially transitioning countries.In India, disparities caused due to historic oppressions might also need to be factored in.

The following analysis reviews Central health spending over the last five years, from FY 2017-18 to FY 2021-22. It relies entirely on Expenditure Profile estimates of government budget documents. The scope is limited to allocations to the Department of Health and Family Welfare and Department of Health Research, ensuring an approximate tally between health spending as per the Expenditure Profile and health expenditure under the Budget at a Glance document.

Total Expenditure on Health over the Last 5 Years

Central allocation for FY 2021-22, made rounds for witnessing a 137% increase in health spending, aided by the inclusion of drinking water and sanitation spending within the health budget.Hiked estimates also included spending on COVID-19 Emergency Response and Health System Preparedness Package worth Rs 11756.96 cr, COVID-19 vaccination for health care worker and front-line workers worth Rs 360 cr, and COVID-19 Emergency Response and Health System Preparedness Package worth Rs 2100 cr (under Dept of Health Research). Keeping these aside, when compared to revised spending for FY 2020-21, estimates for FY 2021-22 are down by 9.51%. Overall spending as a percentage of GDP appears even more alarming (Table 1).

FY  2017-18 (Actual) 2018-19 (Actual) 2019-20 (Actual) 2020-21 (R.E.) 2021-22 (B.E.)
In Crore  52994 54477 63425 82445 74602
% of GDP  0.32% 0.29% 0.31% 0.42% 0.33%

Table 1: Expenditure Profile estimates for central health spending (in crore) measured against RE for GDP figures between FY 2017-18 and 2020-21, and BE for GDP of FY 2021-22 (as per Budget at a Glance).

Health is also a merit good, i.e., while availability of healthcare has positive externalities, it has an inherent tendency to be underconsumed. Further, people tend to engage in risky health behaviours like having a bad diet, smoking, drinking; during the pandemic, not wearing a mask and not following social distancing norms. These behaviours coupled with a low demand for preventive healthcare services reinforces the need to incentivise consumption of healthcare in India. Robust preventive care can significantly reduce OOPE on specialist and inpatient care, even in the case of illnesses as dire as cancer. Nearly 50% of Indian women suffering from breast cancer are diagnosed with stage 3 or 4 of cancer.These are higher stages, where cancerous growth is more difficult to cure or restrict. This is particularly alarming because breast cancer is a self-diagnosable disease. In most cases, it can be detected at earlier stages through preventive breast cancer screening or mammograms. A mere 10% of all Indian women have been screened. For cervical cancer, the estimate stands at 22%.Therefore, promotion of preventive healthcare, both through increased awareness and public spending, can yield desired health outcomes.

Department-Wise Allocation

Over 95% of the total health budget is allocated to the Dept of Health and Family Welfare, the remaining is allocated to the Dept of Health Research. There have been minor discrepancies in Central health spending between budget estimates, revised estimates, and actual spending, marked by a dramatic difference only in the pandemic year. These estimates include departmental spending on (i) central sector schemes, (ii) other central sector expenditure, and (iii) establishment expenditure. Dept of Health and Family Welfare also spends on centrally sponsored schemes.

Figure 1: BE, RE, and Actuals (in crore) for the Dept of Health and Family Welfare, from FY 2017-18 to FY 2021-22. Source: Expenditure Profile for given years (https://www.indiabudget.gov.in/)

Figure 2: BE, RE, Actuals (in crore) for the Dept of Health Research, from FY 2017-18 to FY 2021-22. Source: Expenditure Profile for given years (https://www.indiabudget.gov.in/)

Spending on Centrally Sponsored Schemes

Table 2 shows the temporal shift in spending on centrally sponsored schemes by the Dept of Health and Family Welfare. There has been a marginal increase in the sector.

FY  2017-18 (Actual) 2018-19 (Actual) 2019-20 (Actual) 2020-21 (R.E.) 2021-22 (B.E)
In crore  31886.46 32945.54 37662.91 38283.25 42977.5

Table 2

Centrally sponsored schemes are jointly funded by the state and centre. This section includes central spending on National Health Mission (NHM), Pradhan Mantri Jan Aarogya Yojana (PMJAY) and Rashtriya Swasthya Bima Yojna (RSBY). Spending on NHM receives the largest share, covering the National Rural Health Missions, National Urban Health Mission, RMNCH+A, and Communicable and Non-communicable Disease Control Programmes.

Figure 3: Expenditure on Centrally Sponsored Schemes (in crore) by the Dept of Health and Family Research, from FY 2017-18 to FY 2021-22. Source: Expenditure Profile for given years (https://www.indiabudget.gov.in/)

While health is a state subject, the above analysis indicates relatively substantial Central spending on centrally sponsored schemes. This is reflective of India’s fiscal reliance on the Centre. Budget estimates for 2021-22, however, are not cognisant of the same. At present, under RSBY, an insurance scheme for BPL households with a Rs 30,000 health cover per annum per family of five, there is a 75% funding reliance on the Centre.7 In the case of NHM, states receive specific purpose grants, implying that allocated funds must only be spent on improving health outcomes. There is also merit in assuming that a decentralised approach to healthcare can improve public service delivery. This was made evident in the state of Kerala, which outperformed other states in its COVID-19 response. Therefore, there is a strong case to be made in favour of redirecting funds towards specific purpose grants given to states under NHM. In an ideal scenario, such a redirection would be preceded by an increase in consolidated health spending.

In September 2018, India launched PMJAY, the largest health insurance scheme in the world. With a stated objective of providing health cover to 40% of the population, the scheme covers health expenses for secondary and tertiary care up to Rs. 5 lakhs per family per year. For FY 2019-20, BE for PMJAY was Rs 6556 cr; actual spending was Rs 3256 cr. For FY 2020-21, BE for PMJAY was Rs 6429 cr and revised estimates indicated spending worth Rs 3129 cr. This discrepancy between actual spending (or revised estimates) and budget estimates is reflective of insurance’s demand-driven approach. In the case of India, however, measuring demand for healthcare in these terms reinforces a skewed understanding that assumes perfect access to healthcare. This is a particularly problematic assumption in the case of rural India. While PMJAY offers in-patient care coverage, rural populations often lack access to PMJAY’s empanelled hospitals.

Spending on Central Sector Schemes (CSS) 

Central sector schemes are funded and implemented entirely by the Centre. Estimates under Tables 3 and 4 also include ‘other central sector expenditure.’ Besides a pandemic-led spike in 2020-21, the sector has seen marginal increments.

FY  2017-18 (Actual) 2018-19 (Actual) 2019-20 (Actual) 2020-21 (R.E.) 2021-22 (B.E)
In crore    15028.75 15518.96 19625.87 34633.17 22045.47

Table 3

FY  2017-18 (Actual) 2018-19 (Actual) 2019-20 (Actual) 2020-21 (R.E.) 2021-22 (B.E)
In crore  1717.15 1702.45 1828.36   4024 2618

Table 4

Figures 5 and 6 show department-wise spending on schemes that received maximum allocations. Expenditure on family welfare schemes has witnessed a visible decline over the five year period, reinforcing theoretical assumptions of sacrificing social security schemes in the face of fiscal burden. The highest allocations under central sector schemes go to Pradhan Mantri Swasthya Suraksha Yojana, concerned primarily with improving quality of medical education and research and providing affordable tertiary care. This is followed by the National AIDS and STD Control Programme. Under the Department of Health Research, human resource and capacity building spending has fluctuated a fair bit over the 5 year period. As per WHO guidelines, countries are required to have a doctor-patient ratio of 1:1000. India currently has 1 doctor for every 1456 patients.9

Figure 5: Expenditure (in crore) on Central Sector Schemes by the Dept of Health and Family Welfare, from FY 2017-18 to FY 2021-22. Source: Expenditure Profile for given years (https://www.indiabudget.gov.in/)

Figure 6: Expenditure (in crore) on Central Sector Schemes by the Dept of Health Research, from FY 2017-18 to FY 2021-22. Source: Expenditure Profile for given years (https://www.indiabudget.gov.in/)

Concluding Remarks

Besides being a merit good, healthcare has severe implications w.r.t quality of life and livelihood. India currently levies a 4% health and education cess on income tax. According to stated objectives, the cess is redirected toward BPL households and rural health and education programmes. However, reallocation of non-merit or non-performing expenditure in favour of healthcare could also enable desirable outcomes. In Australian, the sin tax on tobacco is used to fund health promotion organisations. In the state of New York, a similar trend is followed as medical subsidisation for the uninsured is funded through a pool that includes special cigarette taxes.10 Closer to home, the Philippines introduced sin tax reforms in 2012 to support a universalised healthcare model. India has a lot to gain from a similar redistribution mechanism. In 2011, the total economic cost of tobacco consumption was over $22 billion for persons between 35 and 65 years of age. Out of this, $3.6 billion was direct medical cost, $3.1 billion was indirect morbidity cost, and $15.6 billion was the cost of premature mortality.11 Health cess under total tobacco tax, however, amounts to a mere 0.3% (directed toward NHM).12 More importantly, taxes on bidis that account for majority tobacco consumption in India have long been neglected to avoid the economic burden on low income consumers. This neglect underestimates the cost of negative health impacts. Increased monetary cost on consumption of demerit goods not only has the potential to work as a deterrent, but can also be leveraged to increase budget allocations that improve health outcomes.


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https://www.business-standard.com/article/b2b-connect/can-sin-taxes-on-tobacco-solve-f unding-challenges-in-healthcare-system-117011000828_1.html

Primary data source: https://www.indiabudget.gov.in/

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.