The reduction in out-of-pocket spending, which the NHA highlights, is essentially due to a drop in care access
Low public spending on health in India means that people rely heavily on their own means to access health care. It causes divisions in access to health care based on rich-poor, rural-urban, gender and caste, pushes people into poverty, and forces them to take out loans or sell assets. As a result, our health outcomes are worse than those of many neighboring countries.
In this context, the National Health Accounts (NHA) report for 2017-18 is being widely celebrated as it shows that total public spending on health as a percentage of GDP is at a historic high of 1.35% of GDP. has finally reached the 1% -1.2% mark of GDP. Out-of-pocket expenditure as part of total health expenditure is reduced by 50%. Increase in public spending and fall in out-of-pocket spending, if indeed felt, are welcome steps to achieve greater financial security. However, the NHA numbers need to be carefully examined before jumping to conclusions.
The NHA captures health expenditures from various sources, and tracks the plans through which these funds are disbursed to different providers over a given time period for a given geography. Multiple data sources are combined to produce estimates. The largest portion of NHA estimates are spent out-of-pocket, using the National Sample Survey Organization’s “Household Social Consumption: Health” survey. Public expenditure on health is taken from the budget by various departments of the central and state governments, major urban local bodies and social security schemes. Various sources are also used to obtain insurance premiums, expenditure estimates from firms, non-governmental organizations and foreign entities.
Various sources are also used to obtain insurance premiums, expenditure estimates from firms, non-governmental organizations and foreign entities.
cost is one of the lowest
India’s total public expenditure on health as a percentage of GDP or per capita has been one of the lowest in the world. There has been a policy consensus for more than a decade now that public spending has to be raised to at least 2.5% of GDP. However, there has been no significant increase so far. Despite several announcements, it remains around 1%-1.2% of GDP.
The central government traditionally spends about a third of the total government expenditure while the majority is borne by the states. The growth shown in NHA 2017-18 is largely due to increase in Central Government expenditure. For 2017-18, the Centre’s share in the total public expenditure on health has gone up to 40.8%. However, if we study the spending patterns of the Ministry of Health and Family Welfare and the Ministry of AYUSH, we see that the expenditure increased from 0.27% of GDP to 0.32% in 2016-17 – insufficient to explain the overall jump. .
Much of this increase has actually been due to the three-fold increase in Defense Medical Services (DMS) expenditure. As against the expenditure of ₹10,485 in 2016-17, it increased to ₹32,118 crore. During this period, expenditure on the National Health Mission increased by only 16% to ₹25,465 crore. Although increasing expenditure for the health of defense personnel is a good thing, but such expenditure does not benefit the general public. Clearly, the health of women in the reproductive age group and children below five years of age, who constitute a third of our population, has been given less priority than the nearly 64 lakh families covered under the DMS. Another point to be noted is that the share of current health expenditure has come down to 88% as compared to 92.8% in 2016-17. The share of current health expenditure in government expenditure has come down to 71.9% from 77.9% a year ago. This essentially means, there has been an increase in capital expenditure, and particularly in defence.
Capital expenditures
There is a problem with the accounting of capital expenditure within the NHA framework. The equipment brought in or the hospital built serves people for many years, so the expenses incurred are used for the lifetime of the capital created and the use is not limited to the particular year in which the expenditure is made. Calculating capital expenditures for a specific year leads to serious over-calculation. With this in mind, the World Health Organization proposes to omit capital expenditure from health accounts estimates, instead focusing on current health expenditure. However, the estimates of NHA in India, to show higher public investment, include capital expenditure; Thus, Indian estimates become incomparable to other countries.
If we remove capital expenditure, the current health expenditure comes down to only 0.97% of GDP. This is only a modest increase from the previous year’s 0.93%.
sign of more distress
NHA estimates also show that out-of-pocket expenditure as a share of GDP has fallen to less than half of total health expenditure. Over the years, the share of out-of-pocket expenditure has been declining. For the year 2017-18, there has been a decline in out-of-pocket expenditure not only as a share of total health expenditure, but also in nominal and real terms. Is this a welcome development? Does it mean better financial security? Has it declined because public spending has increased?
The NSSO 2017-18 figures show that during this time period, there has been a decline in the utilization of hospitalized care as compared to the 2014 NSSO estimates for almost all the states and different sections of the society. The decline in out-of-pocket spending is essentially due to a decline in care access rather than greater financial security.
The experience of various developing countries shows that as public spending on health increases, access to care increases because there is always a high demand for health care which was hitherto unrealistic because people cannot afford health care. Were. As health care becomes affordable with increased public investment, people have greater access to care. Since it is very unlikely that people’s need for health care has decreased, and current government health spending has not increased substantially, the fall in out-of-pocket spending may be due to less access to care – a sign of distress. Instead of a distress signal a cause for celebration.
In fact, the NSSO survey took place six months after demonetisation and around the same time that the Goods and Services Tax was implemented. The devastating consequences of the double whammy of demonetisation and GST on the purchasing power of the people are quite well documented. As purchasing power decreased, health care became more affordable, forcing people to give up care. Although somewhat more people have turned to subsidized public services, this is not enough to offset the decline in use.
Another plausible explanation relates to the limitations of the NSSO estimates. The NSSO fails to capture the spending patterns of the richest 5% of the population (who spend a major part of health expenditure). Thus, the out-of-pocket expenditure measured by NSSO may be an underestimate as it fails to take into account the expenditure of the richest sections.
In short, one can argue that the increased public spending is not going to benefit the common man as it is mostly a one-time investment for defense personnel. Reduction in out-of-pocket expenditure is a sign of distress and a consequence of the limitations of NSSO’s methodology and not as a sign of increased financial security.
Indranil is a Health Economist and Associate Professor with OP Jindal Global University, Sonepat, Haryana
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