States can play an important role in building necessary capacities and co-funding of schemes, particularly the National Health Mission
Health care spending in India has remained at an all-time low — around 1.3 per cent of the Gross Domestic Product (GDP) — in comparison to other countries such as Thailand and Vietnam that spend close to three per cent of their GDP. The problem of low public health spending isn’t new and has been discussed for a long time. It is also a fact that the issue cannot be solved with a blink of an eye. Yet, people talk about it when Budget season nears and remain critical of the Government’s allocation for this sector. This year’s interim Budget wasn’t an exception. Health allocations were increased to nearly Rs 63,300 crore from Rs 54,600 crore in 2018-19 — an increase of 16 per cent. This is a decent raise. In fact, this is the highest rate in comparison to the last three interim budgets: 10.7 per cent in 2004-05, 3.8 per cent in 2009-10 and 0.7 per cent in 2014-15. For those unfamiliar, the Central health budget consists of two types of allocations: Central schemes and establishments that account for nearly 40 per cent of the health budget and various Centrally-sponsored schemes that account for 60 per cent. Unlike Central schemes that are financed totally by the Centre, Centrally-sponsored schemes are co-funded by the Centre and States but are implemented by the States. In the interim budget, allocations to Central schemes and establishments were raised by 12 per cent; while those to Centrally-sponsored schemes were raised by 19 per cent .
Those criticising the health budget are not much critical of the overall increase, which of course, is a perennial issue but about the perceived misallocation across Centrally-sponsored schemes. To elaborate: Of the two Centrally-sponsored schemes — the National Health Mission (NHM) and the National Health Insurance Scheme (PMJAY) — the budget for the former was increased by only 5.4 per cent while the latter saw an increase of 228 per cent. A significantly smaller increase in NHM budget, much of which goes towards the strengthening of primary care and a huge increase in PMJAY allocation, is being criticised. This is being interpreted as prioritisation of health insurance over primary health care. But this isn’t a fair interpretation. Why? First, in absolute terms, NHM allocations are way above PMJAY allocations. Second, the health insurance scheme is expected to move faster than the strengthening of primary care given the supply of hospital care, both in the public and private sector, and the pent-up demand for such care. On the other hand, primary health care, regardless of the priority it deserves, is slow-moving as supply side needs fixing. This will take some time. Until that happens, the health insurance scheme will continue to receive higher incremental allocations than NHM.
The current challenge with primary health care is that it is getting redesigned and, therefore, new capacities have to be built. So, from the health financing perspective, there is a thin band or an interval between too little allocation and too much allocation. While a generous allocation to primary health care may result in un-utilisation of funds, a somewhat reduced allocation may result in shortage of funds. The fact that allocation to primary health care is closely tied to the issue of capacity creation, appropriate allocations fall within a narrow band. However, the perceived misallocation in health is likely to correct itself over the next few years as supply of primary health care strengthens and the share of public health funding in GDP rises. As per the National Health Policy 2017, the Government is committed to raising the share of public health spending to 2.5 per cent of the GDP by 2025. Further, the Government is committed to spending up to two-third or more of this on the primary healthcare. Achievement of these targets is linked to the overall economic performance and its impact on Government revenues. Also, it’s important to note that States fund two-third of the total Government health spending. So, the health spending goal cannot be achieved without a signification step-up of funding by the States.
Those, who have been following the health budget for the last few years, must have noticed a break from the culture of higher budget allocations. For example, in the last three years, the budget utilisation rate has been over 100 per cent: 106 per cent, 102 per cent and 109 per cent in 2015-16, 2016-17 and 2017-18 respectively. This means that additional allocations were made during mid-year revision of budgets. Contrast this with the budget utilisation rate of 85 per cent, 81 per cent and 81 per cent in 2011-12, 2012-13 and 2013-14 respectively. This suggests that initial budget allocations are indicative that it can be revised upward, if needed. The need is also to discuss issues of outputs and outcomes too.
To sum up, health allocations in this year’s budget were decent by standards of an interim budget. States have an important role to play both in building necessary capacities and co-funding of schemes, particularly NHM. It is important to get this perspective right in understanding the Central health budget.
(The writer is a development economist, formerly with the Bill & Melinda Gates Foundation and the World Bank)
