Health Financing in India

Agenda

What is a health system?What does health financing provide ?What are the functions of health financing

mechanisms?What are the sources of health financing in

India?Comparison of health financing of India

with other countriesHealth Investments in India

What is a health system?

A health system is the sum total of all the organizations, institutions and resources whose primary purpose is to improve health.

Source: http://www.who.int/topics/health_systems/qa/en/index.html

A health system needs staff, funds, information, supplies, transport, communication and overall guidance and direction. A health system needs to provide services that are responsive and financially fair, while treating people decently.

What are the functions of health financing mechanisms?

Source: Schieber G, Baeza C et al, Financing Health Systems in the 21st century, Chapter 12, Disease Control Priorities in Developing Countries, OUP & World Bank, 2006

Meaning of terms

Revenue Collection is the way health systems raise money from households (e.g. taxes, user fees, private health insurance), business (e.g. taxes, private health insurance, social health insurance), external aid (e.g. grants, loans)

Pooling deals with collection and management of revenues so that members of the pool share collective health risks

Purchasing refers to the mechanisms used to purchase services from public and private providers

Health Financing Mechanisms

Taxes

Providers

Employers & Consumers

Tax Collector Social Insurance Revenue Collector

Risk Pooling Entity

General Taxation

Social Health Insurance

Private Health Insurance

Out-of-pocket expenses

Adapted from: Mossailos E; Dixon A: Funding healthcare in Europe: weighing the options, European Union: 272-300:2000

What are the sources of health financing in India?

Source: Kataria,M., Finances of Health Care Services (BOP-WHO Workshop-1995)

Sources of Financing Healthcare in IndiaSource of Funds % Distribution

(a) Public Funds

Central Government 6.4

State Government 12.6

Urban Local Bodies and PRIs 1.3

Total (a) 20.3

(b) Private Funds

Households 72.0

Firms 5.3

NGOs 0.1

Total (b) 77.4

(c) External Support

Grants to Central Government 1.5

Material Aid to Central Government

o.1

Grants to State Government 0.2

To NGOs o.5

Total (c) 2.3

Total funds 100.0

Statement of funds for health care in India

Source: National Health Accounts, 2005

Estimated health expenditure in India =Rs 108,732 crore or 4.8% of GDP at current market

price

Health Expenditure as compared to other countriesIndicator India Chin

aUSA Sri

LankaThailand

Health Expenditure as % of GDP

4.8 5.8 14.6 3.7 4.4

IMR/1000 live-births 68 <30 2 8 15

Under-5 mortality/1000 live-births

87 37 8 15 26

Higher health expenditures does not necessarily result in better health outcomes

Public Expenditure on Health as % of GDP (2004 data)

Source: UNDP, Human Development Report 2008

Government Health Expenditure (as % of GDP)

Source: RBI Bulletin, Expenditure Budget, Govt of India

Contribution to Health Expenditure by Central and State Government (as % of GDP)

Source: RBI Bulletin, Expenditure Budget, Govt of India

Impact on state spending on health due to FRBM Act

Total Revenue Expenditure by All States as % of GDP

Source: Revenue Accounts, Various states

Extent of under-utilization of Health Budget (%)

-: Overspent, +: Underspent

Source: RBI Bulletin

Trends in Public Health Expenditure

Public Expenditure on health is less than 1.2 percent of GDP (WHO recommendation- 5% GDP)

In Maharashtra less than 2% of total state expenditure is on health (Standing Committee recommends around 5% of total state expenditure should be on health). In the year 2001-02 around 2.47% of total state expenditure was on health, which had decreased to 1.87% in the year 2004-05.

Only 17% of BMC’s budget for health (about Rs 9.75 billion in 2006) (Mandated is 1/3rd of budget)

86% of BMC’s public health budget is endowned on four major hospitals (KEM, Nair, Sion, Nair Dental)

Structure of Health Sector Spending

Budget Heads % AllocatedSalaries and Wages 70

Drugs, medicines, supply, 12

Purchase of equipment and machinery

8

Maintenance of equipment, buildings, electricity, rent, taxes etc

5

Other routine expenditures 5

TOTAL 100%

Hospitalization Treatment-All India

Source: NSSO 60th round

Non-Hospitalized treatment-All India

Source: NSSO 60th round

Trends in health services utilization

Percentage distribution of cases of hospitalized treatment in urban areas by type of hospital during 42nd, 52nd and 60th NSSO rounds

0

10

20

30

40

50

60

70

42nd 52nd 60th

NSSO rounds

Perc

en

tag

e

GovernmentNon-Government

Type of Hospital NSSO 60th round NSSO 52nd round

Government Hospitals 3877 2195

Private Hospitals 11533 5344

Any hospital 8851 3921

The NSSO 60th round mentions an increase in both utilization of private sector utilization and hospitalization expenses in urban areas as compared to NSSO 52nd round

Health Insurance Landscape in India

Total Population 1.2 bn (Oct 04)

Private sector enterprise 55,000,000

Community Health Insurance 07,000,000♦

CGHS 40,000,000

ESIS 38,000,000

Private Health Insurance (Mediclaim) 17,000,000

Indian Railways 07,000,000

Uninsured 943 million

Source: Industry data 2004, ♦ ILO Estimates

Limitations of Existing Insurance and Social Security Mechanisms10% of population are covered through any

form of health security0.4% of informal sector population have any

sort of social security (NCEUS, 2007)ESIS, CGHS and ECHS- social security

mechanisms are only for formal sectorGovernment social security mechanisms are

BPL-targeted (estimates are that only 70% of population have ration cards and many of populations are not actually poor)

Most newer government financing schemes are insurance-based e.g. RSBY

Contd...

Only about 6-7% of population has some sort of coverage

Health insurance penetration is low- only 3% of population covered

Of which 50% of them are under social insurance, 23% under private health insurance and rest 17% under community health insurance

Impact on households due to lack of health security and low public health spending6 - 8% of patients who fell ill did not seek care

because of financial reasons1

Among those who sought careAbout 25% of hospitalised patients are

impoverished2

Every year, an additional 3.7% of the population is impoverished because of medical causes3

Medical care is one of the 3 main causes of impoverishment in the country4

Medical inflation stands at 13% CAGR (Compared to 7% CPI and 7.3% urban income growth and 1.9 % rural income growth)1- NSSO 60th round

2- World Bank, 20023- van Doorslaer,E; O'Donnell O; Rannan-Eliya RP; et al. Effect of payments for health care on poverty estimates in 11 countries in Asia: an analysis of household survey data. Lancet 2006 4- World Development Report 2004

Way Forward ???

High income

Middle income

Low income

Poor Very poor

Formal sector

SHI + PHI SHI + PHI SHI NA NA

Self employed

PHI PHI CHI CHI NA

Informal sector

PHI PHI CHI Social assistance

Unemployed NA NA CHI Social assistance

Acknowledgements: Dr N Devadasan

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