Health allocation may have belied expectations, but the evidence indicates that central health spending has grown significantly higher under the NDA than under the last four years of the UPA, despite states getting a higher share of the devolved central taxes in the post-14th Finance Commission award period.
On being asked to name the biggest announcement in this year’s Union Budget, many experts have commented that it is the National Health Protection Scheme (NHPS) that has the potential to be transformational. NHPS is meant to provide financial protection to 10 crore poor and vulnerable families against hospitalisation costs. It is an important component of the Ayushman Bharat programme, whose other big component deals with converting 1.5 lakh health sub-centres that currently provide selective primary care to health and wellness centres (HWCs) that would provide preventive and promotive public health services as well as comprehensive primary care.
Seeing the health announcement becoming the biggest talking point in the Budget, health policy observers are at loss, or even perplexed, by not finding commensurate increase in health allocation. Indeed, at Rs 56,225 crore (or `420 per capita), the central health budget for 2018-19 has grown by only 11.8% (in nominal terms) over last year’s Budget allocation. And if health allocation for 2018-19 is compared with actual allocation made last year (instead of beginning-of-the-year Budget allocation), health allocation for 2018-19 has grown by a mere 2.4%, which means that, in real terms, the growth in health allocation has been negative. Further, the amounts allocated to the two major components of Ayushman Bharat—i.e. NHPS and HWCs—are a paltry `2,000 crore and `1,200 crore, respectively, which constitute only 3.6% and 2.2%, respectively, of health allocation for 2018-19. This has led to some health experts saying that NHPS is an election gimmick.
Faced with the criticism of inadequate Budget provisions for its biggest health announcement, both the health minister and the vice-chairman of NITI Aayog were quick to reassure the policy observers that revenue from the 1% additional cess on the incomes of rich taxpayers would be enough to meet the funding needs of NHPS. Adequate funding for any specific programme is one thing, but raising public health spending, which is woefully low in India, is quite another.
In its National Health Policy 2017, the government has committed to raising the share of public health spending in the gross domestic product (GDP) from the existing 1.15% to 2.5% by 2025. Although the central government contributes only around 37% of the total public health spending (the balance 63% is contributed by the states), a significant increase in annual health allocations by both the Centre and states would be necessary for achieving the health financing goal. Therefore, growth in central health allocations of only 11.8% in Budget 2018-19 will make it more difficult to progressively achieve the health spending goal.
Central health budget in perspective
The Budget analysis over a short period gives a limited perspective. To gain a fuller perspective, it is important to ask: How has the health budget fared during a longer time period?
In the four years of the current NDA government, central health spending has grown (in nominal terms) from `32,154 crore in 2014-15 to `54,852 crore in 2017-18, representing an increase of nearly 71%. However, much of this increase occurred in the last two years, while the growth during the first two years of the NDA government’s term was business-as-usual. Admittedly, the health expenditure of `54,852 crore in 2017-08 is a revised Budget estimate, but it is likely to be quite close to the actuals, going by the experience of the last three years.
Health budget: NDA versus UPA
Comparing health spending under the NDA regime with the erstwhile UPA regime is quite sensitive to the choice of period of comparison. Comparing four years of the current NDA government with the last four years of the erstwhile UPA government, it turns out that growth in health spending is significantly higher under the NDA regime. While the health spending grew by 70.6% between 2014-15 and 2017-18 (first four years of the NDA regime), it grew by only 23.3% between 2010-11 and 2013-14 (last four years of the UPA regime).
However, the above finding reverses if we, instead, consider the first four years (rather than the last four years) of the UPA regime, when the growth in health spending was 83%—significantly higher than achieved under the current NDA regime (see chart).
Which comparison is more appropriate? Well, the comparison with the last four years of the UPA regime makes better sense as this comparison maintains continuity in time when economic growth rates were also not too dissimilar. Further, higher growth in central health spending under the NDA occurred despite states getting a higher share of the devolved central taxes in the post-14th Finance Commission award period.
Public health spending over the medium term
Regardless of the UPA regime or the NDA regime, the growth rates of health spending achieved are nowhere close to what is required for meeting the goal of raising public health spending to 2.5% of GDP by 2025.
The Economic Survey 2017-18 estimates the share of total public health expenditure (Centre and states) to be 1.4% of GDP in 2017-18. Simple growth analysis suggests that if India’s economy grows at 8% annually from 2018-19 to 2024-25, then total public health spending must grow at 17.5% in real terms every year to achieve the health financing goal by 2025. Even if the Centre is somehow able to achieve this growth rate, it will be a tall order for many states having limited fiscal space and facing shape trade-offs among competing development priorities.
Further, for raising the share of public health spending, getting the service delivery side right at scale is a necessary condition. Hence, any discussion on achieving the public health spending goal needs to happen alongside the discussion on pathways for service delivery scale up.
Rajeev Ahuja, A development economist, formerly with the Bill & Melinda Gates Foundation and the World Bank, firstname.lastname@example.org