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Public Expenditure for Healthcare
Sakti Golder, Research Officer, Centre for Budget and Governance Accountability (CBGA)  New Delhi  01/03/2011 3:12:42 AM

  India is becoming a preferred destination for medical tourism and super-speciality healthcare but it has a long way to go in providing basic healthcare to the people. The persistence of deficits in the health outcomes of a majority of the country’s population is rooted in the poor state of public provisioning of healthcare. Public expenditure accounts for a small share in total expenditure on healthcare in India, which reflects the low priority accorded to health sector in the government budgets of the country.

International Comparison Illustrates India’s Low Public Expenditure on Healthcare

 When compared to the developed and many developing countries, the share of public expenditure in the country’s total expenditure on healthcare appears to be very low for India and, (as per the latest available National Health Accounts of India) it is lower than other Asian countries like China, Malaysia, Sri Lanka, Thailand and Bangladesh. India ranks sixth from the bottom, amongst all countries in the world, in terms of public expenditure on healthcare as a proportion of the Gross Domestic Product (GDP).

 High Burden of Healthcare Expenditure on the Households
  Analysis of healthcare expenditure from the Union Budget and State Budgets in India, which is presented in the subsequent sections, clearly shows that the country’s overall magnitude of public expenditure on healthcare is very low. As a result of this, India’s healthcare system is among the most privatized healthcare systems across the world. In India, people have to depend significantly on the private sector for availing different kinds of healthcare services. Consequently, the burden of spending for healthcare falls directly on households and a major part of healthcare expenditure in India is out-of-pocket expenditure by people, which has strong adverse implications for the poor. According to a recent paper1, the analysis of NSSO’s latest (60th round) national morbidity, healthcare survey data suggests that around 6.2% of total households in the country fell Below Poverty Line as a result of healthcare expenditure in 2004; among which around 1.3% of the households fell Below Poverty Line as a result of expenditure on inpatient care, while 4.9% of the households fell Below Poverty Line as a result of outpatient care.
The latest available National Health Accounts shows that in 2008-09 (provisional estimates), out of total healthcare expenditure in our country, only 26.7% was public expenditure and 71.6% was private expenditure with external assistance accounting for a very small share of 1.7% (see Figure 1). Out of the total private expenditure on healthcare, out-of-pocket expenditure accounts for a very large chunk as the healthcare expenditure financed by health insurance and expenditure done by other private bodies are very low.

Low Priority for Health Sector in the State Budgets
Table 1 presents the combined expenditure on Medical & Public Health and Family Welfare incurred from the Budgets of all States over the last decade. It is disturbing to note that expenditure on Health and Family Welfare as a proportion of total expenditure from the State Budgets has hovered around just four percent over the last decade.

We may note here that, during 2001-02 to 2004-05, when most States were going through a fiscal crisis, the priority accorded to Health & Family Welfare in the State Budgets had been brought down from 4.4% to 3.4%. What it shows is expenditure on health sector has been a ‘soft target’ when the States have confronted a resource crunch. Although the priority for health sector in the State Budgets has improved since 2005-06, it is still very low; in 2009-10 (BE), expenditure on Health & Family Welfare accounts for just 4.2% of the total expenditure from State Budgets.
Total Public Expenditure on Health Sector has been Stagnant
In 2004, the United Progressive Alliance (UPA) Government at the Centre had made a commitment in their National Common Minimum Programme (NCMP) that total public spending on health in the country would be raised to the level of two to three percent of GDP. The Eleventh Five Year Plan (2007-08 to 2011-12) also emphasized the same commitment. However, the total public expenditure on health in India has not shown any significant increase, when compared with the country’s GDP, over the last six years. In 2009-10 (BE), the combined budgetary allocation (i.e. the total allocation from both Union Budget and State Budgets) for health sector stands at a meager 1.06% of GDP, which is far below the promised level of public expenditure on health.

We may note here that a major chunk of India’s public spending on health comes from the State Budgets. In 2003-04, the expenditure on Health & Family Welfare incurred from the State Budgets accounted for almost 71% of the country’s total public expenditure on health; this proportion has shown a marginal decline over the last three years and reached 67% in 2009-10. Thus, although the Union Budget allocation for Health & Family Welfare has been increased gradually since 2005-06, it still accounts for only one-third of the total public expenditure on health in the country. The expenditure on Health & Family Welfare from the State Budgets has increased at a much slower pace over the last six years. As a result, the combined expenditure of Centre and States on Health and Family Welfare has increased very slowly from 0.9% of GDP in 2003-04 to 1.06% of GDP in 2009-10.


Inadequate Priority for Health Sector in the Union Budget
Despite the gradual stepping up of Union Budget allocation for Health & Family Welfare since 2005-06, Centre’s expenditure on health still accounts for a very small magnitude as compared to the overall level of public spending on health recognized as necessary for the country. As shown in Table 3, Centre’s expenditure on health stood at a meager 0.26% of GDP in 2003-04, which has increased gradually to reach 0.36% of GDP by 2010-11 (BE). In terms of the priority accorded to health sector in the total spending from Union Budget, we find that in 2003-04 only 1.6% of the total Union Budget was meant for health. The share of health sector in the total spending from Union Budget has increased to 2.3% by 2010-11 (BE), which has happened mainly due to the stepping up of budget outlays for the flagship programme of the Centre in the health sector viz. the National Rural Health Mission (NRHM).

Given the disturbing scenario pertaining to the high extent of privatization of India’s healthcare system and the high burden of healthcare expenditure on the households, the priority for health sector in the Union Budget should be significantly higher. Moreover, the increase in Union Budget outlay for health sector over the last few years seems inadequate not only in comparison to the NCMP commitment of total public spending on health at 2-3% of GDP but also in comparison to the level of budget outlays recommended by the Planning Commission for the Eleventh Five Year Plan period (2007-08 to 2011-12).

In the current discourse on planning and government budgeting in the country, there are very few benchmarks for assessing the adequacy of public spending on development programmes / schemes in the social sectors. In this context, the budget outlays recommended by the Planning Commission for the Eleventh Five Year Plan period (2007-08 to 2011-12) could be treated as some such benchmarks, even though the quality parameters underlying these benchmarks would hardly be satisfactory.

With just one more Union Budget left in the Eleventh Five Year Plan period (i.e. the Budget for 2011-12), around 80% of the outlays recommended by the Planning Commission should have been made for the Plan programmes / schemes during 2007-08 to 2010-11. However, for the National Rural Health Mission (NRHM), the total provisioning in the four Union Budgets during 2007-08 to 2010-11 has been only 57.5% of the quantum of funds recommended by the Planning Commission for the Eleventh Plan period (see Table 4) — while the Planning Commission had recommended a total outlay of Rs. 89478 crore for NRHM for the Eleventh Plan period, the total budget allocation made by the Centre in the first four years of the Plan period stands at Rs. 51417 crore. Given the need for additional funds across the country to augment rural health infrastructure, fill in vacancies of doctors, Auxiliary Nurse Midwives and para-medics, the Union Budget allocations for NRHM should have been significantly higher.

Two of the new schemes launched in the Eleventh Plan, “District Hospitals” and “Human Resources for Health”, deal with some of the most acute problems confronting the health sector in our country; however, the total plan allocations made in the Union Budgets for 2007-08 to 2010-11 for these new schemes have been as low as 10% of the quantum of funds recommended by the Planning Commission for the Eleventh Plan period.

In the latest Union Budget (i.e. for 2010-11), the Central Government has proposed to include in the Rashtriya Swasthya Bima Yojana (RSBY) all those National Rural Employment Guarantee Scheme (NREGS) beneficiaries who have worked (in the scheme) for at least 15 days in the last fiscal year. While this is a welcome development; there are several concerns pertaining to the implementation of RSBY (relating mainly to the role of private health insurance companies and the private healthcare institutions involved in RSBY), which need to be addressed.

Expectation in the Union Budget 2011-12:

    On the basis of the above discussion, it can be argued that many of the Plan schemes in the health sector continue to follow a welfarist approach and provide low-cost, ad hoc interventions. An entitlements-based approach towards public provisioning in the health sector would require a significant strengthening of the regular and sustained government interventions in this sector, which would inevitably require a much higher magnitude of public expenditure on health than what is still prevailing in India. Therefore, as an immediate action, at least the following issues must be addressed in the Union Budget 2011-12. 

  •  Overall allocation for the health sector should be in increased in the union budget 2011-12, to fulfil the UPA Government’s commitment to increase the health expenditure to 2-3% of GDP.  
  • Allocation of Union Government on Health has increased to Rs. 25,154 crore in 2010-11 from Rs. 22,614 crore in 2009-10. This is an eleven percent increase compared to previous year. Out of this, external contribution (Externally Aided Projects, EAP) is Rs. 3986 crore, which is 16% of total Union Government’s Budget on health. In the previous year, EAP contribution was Rs. 3,192.71 crores. This is a 25% increase from previous year. When we exclude the EAP contribution from Union Govt’s budget, the increase is nine percent only.
  •  Dependence on external resources lays countries open to sanctions and withdrawal of funds, and changes global priorities for funding, impacting availability of resources and thus delivery of programmes. It is inevitable that some of the major programmes of the Union Government that pertain to health sector are affected by the fluctuations in the external flows. There is a need to ensure that such fluctuations do not impact the overall outlays for the health-specific programmes.
  • Allocation on NRHM has increased only by 11 percent from Rs. 14,002 crore to Rs. 15,514 crore in 2010-11. Given the requirement of additional funds to augment rural health infrastructure, fill in vacancies of doctors, ANMs, and para medics this seems to a paltry increase. Given that spending by states under NRHM has also picked up off late, Union Government should increase allocation further. In fact, there should be a quantum jump in the allocation for the NRHM in the Union Budget 2011-12 (as it is the last year of the present plan period), to fulfil the recommendations of the Eleventh Five Year Plan.
  • The allocation for National Disease Control Programmes has been reduced from Rs. 1063 crore in 2009-10 (BE) to Rs. 1050 crore in 2010-11 (BE), which is disturbing given that a number of diseases covered under the scheme have witnessed increased prevalence in the recent past. The trend must be reversed in the upcoming union budget.
  • Overall allocation on Medical Education and Training has gone down from Rs. 3,255.94 crore in 2009-10 BE to Rs. 2,678.84 crore in 2010-11 BE. Within this, the most pronounced is the fall in allocation on Establishment of AIIMS type Super Specialty Hospitals. It is to be seen whether the government is rolling back from creating more AIIMS like institutions or not. In the context that post graduate medical education needs to be prioritized to fulfil requirement of the specialist doctors, allocation on this should be increased. However, the central government has reduced allocation on two premier institutes like PGIMER Chandigarh, JIPGMER, Puducherry.
  • At the same time, the Union Finance Minister’s proposal for Annual Health Survey to prepare District Health Profile for all districts (which was slated to begin from 2010) is a welcome step; but the government would need to allocate adequate funds for this purpose. We may note here that no allocation towards this has been made in Union Budget 2010-11. We would expect that adequate funds will be allocated in the Union Budget 2011-12. 

End-notes and Additional Thinking
1 Berman, Peter, Rajeev Ahuja and Laveesh Bhandari (2010), “The Impoverishing Effect of Healthcare Payments in India: New Methodology and Findings”, Economic and Political Weekly, Vol. XLV No. 16

(Sakti Golder has been with CBGA since October 2005. He has done a BA in Economics from Jadavpur University, Kolkata, and MA and M.Phil from the Centre for Economic Studies and Planning at Jawaharlal Nehru University, New Delhi. He is currently working with CBGA as a Research Officer. He has worked on a number of research studies in CBGA, which pertained to the analysis of public spending on children, issues relating to Centre-State fiscal relations, budgeting for dalits and adivasis, and transparency in the Union Budget of India. At present, his research focuses on government financing of healthcare, budgeting for children and budgetary provisions for social security for unorganised workers.

The author gratefully acknowledges for valuable research inputs and suggestions from Subrat Das and Trisha Agarwala. The views expressed in the write-up are personal and do not re?ect the official policy or position of the organization.)


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