How India spends on health

Dec 11, 2017 06:01 PM IST

When Fortis Hospital in Gurgaon billed the family of a seven-year-old girl who died of dengue in September a sum of over Rs 16 lakh, outrage ensued over allegations of ‘overcharging’ by private hospitals in India.

HT Image
HT Image

While that is a problem, new data from the National Health Accounts (NHA) published by the Union health ministry reveals that medicines are the biggest financial burden on Indian households. Of more than three lakh crore rupees that households spent on health in 2014-15, around 42% of the total out-of-pocket spending (OOP) went in buying medicines. In private hospitals, households spent around 28% of the OOP spending.

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OOP spending is the money individuals pay on their own rather than being covered by insurance or health benefits and constitutes 62.6% of the total health spend in India — including all government and private sources, latest NHA data shows.

This has direct bearings for reducing OOP expenditure. “Every public facility should be providing a list of essential medicines and diagnostics for free, as medicines and diagnostics are significant causes of the OOP spending,” said Indranil Mukhopadhyay from the Public Health Foundation of India (PHFI).

This also means that the government’s push for generic drugs, which are generally cheaper, can help reduce a significant proportion of household spend on health.

Households spent four times less in government hospitals (7.5%) as compared to private hospitals. Another 7% was spent on medical and diagnostic laboratories and 6% on patient transportation and emergency rescue services. The estimates for household spending breakup were made through various surveys of NSSO and NFHS.

Experts say that high OOP for health brings a financial burden on families and discourages people from seeking timely care. India has one of the highest private OOP expenditures in the world. “OOP, when catastrophic, results in seven crore people falling back into poverty line,” former Union health secretary CK Mishra said at a conference organised by the National Institute of Public Finance and Policy (NIPFP) last week.

International Comparison

Cross-country comparable NHA data from WHO’s Global Health Expenditure Database shows that India’s OOP spending as a proportion of total health expenditure is extremely high when compared with BRICS nations, the United States and the United Kingdom. For none of these countries, does OOP share in total health spend exceed 50%.

However, this is not the only problem. International experience indicates that low public spending is behind the high OOP share in India.

When compared with BRICS, the UK and the US, India has the highest share of private spending on health and the lowest share of government spending. Of the total health spending in India, the government contributes just 29%. In the UK, the government’s share is 83%. For others, this figure ranges between 45 and 55%.

As a proportion of GDP, Indian government spends just 1.1% on health. The 2017 National Health Policy set a goal of raising this figure to 2.5% of GDP by 2025.

There has been little change in government spending over the last decade or so. Government’s share in total health spend increased slightly from 22.5% in 2004-05 to 29% in 2014-15. In the same period, OOP share decreased from 70% of the health spend to around 63%—indicating that a further rise in public spending may decrease the OOP burden.

Unutilised funds

Increase in government spending is crucial but accountability and utilisation is equally important. Despite the low budgetary allocation to health, says Yamini Aiyar, President and Chief Executive of Center for Policy Research, “the government is unable to spend the relatively little it does have.”

“The system is so deeply broken that even some of the basic things like moving money and spending money become a complicated task,” Aiyar said at the NIPFP conference, pointing to the inefficiencies and systemic problems in how public finances are managed in the country.

“Bihar, for instance, in 2016-17 spent just 54% of its approved budget for the year. Health issues in Bihar require massive expenditure, yet the state is able to spend remarkably little,” Aiyar said.

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    Samarth Bansal is a data journalist based in New Delhi, with a keen interest in politics and public policy.

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