1. Health financing : Even the richest 13% in India have to spend out of pocket on healthcare

Health financing : Even the richest 13% in India have to spend out of pocket on healthcare

The issue of health financing has become absolutely critical for India with the demographic shift in mortality to the working-age population (15-64 years) and the epidemiological shift to chronic diseases.

New Delhi | Published: September 29, 2016 6:25 AM
Investments in health and education spurred and sustained economic growth in developed countries. (Reuters) Investments in health and education spurred and sustained economic growth in developed countries. (Reuters)

The issue of health financing has become absolutely critical for India with the demographic shift in mortality to the working-age population (15-64 years) and the epidemiological shift to chronic diseases, which are prolonged and expensive to treat, thereby imposing enormous stress on households’ and the country’s economy. Despite being one of the fastest-growing economies in the world for close to a quarter century now, total government health expenditure (that of Centre, states/UTs combined) has remained between 4.5-5% of total government expenditure (1995 to 2014, World Development Indicators/ WDI).

The accompanying table shows that the health sector in India has been accorded lower priority in terms of government spending not only in comparison with high but also low income countries as well as its BRICS and South Asian counterparts—Pakistan being the sole exception, with whom India stands among the bottom ten countries on this front. Health financing seems to suffer in countries involved in conflict—governments tend to spend more on military than healthcare in such situations, as appears from the case of not just India, but also Russia, China, Pakistan and Sri Lanka. Nevertheless, Afghanistan stands out in this regard—despite being in severe conflict for the last couple of decades, it is spending four times more on health than its military. And so does Nepal to a lesser degree, with the result clearly indicated in its health outcomes—its infant mortality rate fell from 99 to 32 between the years 1990 and 2013, while that of India went down from 88 to 41. Life expectancy at birth in Nepal is also higher by two years than India’s 66 years.

Low government health spending has meant that a vast majority of people, irrespective of their paying capacity, have to incur out-of-pocket (OOP) health expenditures—nearly 10% of total household expenditure across income groups in India (WHO SAGE Survey 2007)—with surgical care putting more than two-thirds of population at the risk of impoverishment. OOP health expenditures become catastrophic even for 13% of India’s richest (Survey). While high rate of capital accumulation was one of the key elements in East Asia’s economic success, as much as 30% of India’s richest have to finance their healthcare from savings and 29% through borrowings (Survey). Such a situation not only puts households, but national economy under severe stress and uncertainty vis-à-vis savings and productive investments, especially on human capital. With Indian firms trying to become more global and competitive at home and abroad, the health of working-age population matters more than ever. The signs of burnout are clear in a highly aspirational context, among those trying to make their ends meet, and an educated workforce trying its best to be globally competitive—mental health is the biggest source of disability in India’s workforce.

Investments in health and education spurred and sustained economic growth in developed countries. The predominant argument in India has been that we need growth first to have the resources to invest in human capital. However, the question is—why, despite sustained high growth rates and the country being among top ten economies in the world, has the health sector not been accorded the priority that it has been in other countries within the elite club? According to Economic Survey 2015-16, “India taxes less and spends less (especially on human capital)”. In F11, tax-to-GDP ratio was 16.6%, lower than each of its BRICS counterparts and nearly half of the OECD average. Most citizens in OECD countries do not mind paying higher taxes as long as they feel cared for by their governments. How many of us feel the same in India? Isn’t that one of the major reasons why we don’t really feel like paying taxes or consider them as burdensome? If households can allocate 10% of their total expenditure to health, why can’t the government do the same? If the government increases the fiscal pie for citizens’ health, there are high chances that the size of the fiscal cake would also increase.

The author leads the Health Policy Initiative at ICRIER, New Delhi. Views are personal

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