Is India’s public health spending strategy ill defined?

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Published: September 28, 2019 1:35:40 AM

India’s public health spending goal is a classic example of this.

A good financing strategy is the one that would define the role of the Centre, too, in addition to that of states.

The recent GDP estimates cast doubt on the Indian economy achieving the $5-trillion goal by 2024-25. Does it also cast doubt on India achieving its public health spending goal that is defined in GDP terms? Before answering this, some background—India has set a goal of raising the share of its public health spending to 2.5% of GDP, or $125 billion, by 2024-25. If the GDP doesn’t grow at a desired pace of over 8% per annum, this will likely have implications on the government achieving its health spending goal, too. For example, if the economy were to reach $4 trillion instead of $5 trillion by 2024-25, the amount needed to achieve the health spending goal will also get reduced to $100 billion, instead of $125 billion. But mobilising $100 billion out of a lower GDP of $4 trillion will likely pose a challenge.

Further, the difference of $25 billion for healthcare is huge, particularly when the government has rolled out large programmes like Ayushman Bharat with a commitment to achieving some real targets in a time-bound manner. If the goal is so defined that its achievement can result in significantly different levels of funding, depending on how the economy fairs, have we not defined the goal incorrectly?

Health spending goal

This article argues that health spending goal being wrongly defined is probably the case. Government spending on health comes out of government’s total budget, which is only 20-22% of GDP. By defining a public health spending goal in terms of GDP, we subject that goal to the rise and fall of the entire GDP, as explained above. Instead, defining the goal in terms of government total spending probably makes for a much better case. This is because it would indicate what share of government’s budget would be devoted to healthcare, regardless of GDP. This is particularly important when one examines why India compares poorly with its peers in its public health spending. Not because India is significantly poorer than its peers. But because Indian government has not prioritised health in its total spending.

However, if one were to consider India’s total health spending (both public and private included), then defining a goal in terms of GDP would be absolutely fine. But not so when one is considering only public health spending.

Goal needs a strategy, too

How a goal is defined is one thing, and devising a strategy to achieving the goal is quite another. Going by the National Health Policy 2017 (NHP 2017), India hasn’t devised a clear strategy to achieving its health spending goal. NHP 2017 calls upon states to spend at least 8% of their budgets on health by 2020. It’s unclear how this strategy, by itself, will help in achieving the goal.

In India, both the Centre and states contribute towards public health spending, with states playing a dominant role. But the contribution of the Centre—which accounts for anywhere from one-third to one-fourth of total public spending—is not insignificant. The NHP 2017 doesn’t say anything on the Centre’s contribution towards achieving the goal. This point is particularly important as the Centre’s health spending is not entirely independent of states’ spending. For example, Ayushman Bharat—comprising free hospitalisation cover for the poor as well as establishment of Health and Wellness Centres throughout the country—is co-funded by the Centre and states in the ratio of 60:40 for most states (this ratio is 90:10 for the three Himalayan and the North-Eastern states). Co-funding of this programme, and indeed of the National Health Mission, ties central funding with the states funding for health. Additionally, the Centre has a host of other programmes that are fully funded by it. These facts imply a growing role of the Centre in achieving the health financing goal. A good financing strategy is the one that would define the role of the Centre, too, in addition to that of states.

Setting intermediate milestones

A good strategy would set intermediate goals or milestones so as to connect the dots with the final goal. The only intermediate milestone set in NHP 2017 is that states spend 8% of their budgets on health by 2020. This milestone is not only inadequate, but also ambitious, given that states have been spending less than 5% of their total budget on health in the last 15 years or so. Unsurprisingly, then, that nearly all states will miss the 8% target. Does this mean that we’ve missed the goal of 2.5% of GDP? We don’t know yet, precisely because NHP 2017 does not provide any clear guidance on this.

Recently, both the Union health minister and a senior NITI Aayog officer reiterated government’s commitment to achieving the goal, which appears to be a tall order. In the event of missing the goal, which looks highly probable, the blame would fall on states. The basic idea isn’t to be able to blame anybody, but to facilitate achievement of the goal. If there were intermediate milestones, those would provide early warning signals and indicate the need for course correction. Unfortunately, no such guidance is contained in NHP 2017.
If the public health spending goal were expressed as a share of government budget, both for the Centre and states, it would have brought greater certainty into it. A gradual increase in those shares would have served as intermediate milestones.

How well any goal, and a strategy for achieving the goal, is defined can itself hinder or promote it. India’s public health spending goal is a classic example of this. Taking a cue from this, will the Indian health policymakers make necessary amends? It’s not too late yet, as we still have more than five years between now and 2024-25.

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