rural healthcare financing management paper
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A STUDY ON FINANCING OF RURAL HEALTHCARE IN INDIA
N. srinu1
Introduction
Since India's independence in 1947, improvement in the health status of the population
by raising the access to and utilisation of health, family welfare and nutrition services,
has remained one of the major thrusts for social development. Over the last five decades,
India has created a vast healthcare infrastructure and manpower, which has been
considerably modernised, and helped in reducing mortality and improving life
expectancy. However, India despite being a signatory to the Alma Ata declaration of
1978, which aimed at achieving 'Health for All' by 2000, is still lagging behind from
realising this dream, even in 2003. Issues related to accessibility, efficiency, and quality
of the health delivery continue to haunt the policy makers. There are huge gaps in the
placement of critical manpower in primary healthcare institutions with wide inter-state
and intrastate variations in rural and urban settings. The overall health system continues
to function inefficiently and poorly partly due to mismatch between personnel and
infrastructure, lack of skill up-grading and orientation programmes, absence of well
established linkages between different system components, and lack of an appropriate
functional referral system. Structural changes are taking place in the health sector at a
time when the world economy is also changing rapidly with globalisation policies
becoming deep rooted and widespread, challenging the established development
paradigms. As envisaged in the initial years of independence that the provision of basic
public health services would be provided free of cost is no longer appreciated particularly
since the early 1990s. Due to squeezed budgetary support and growing fiscal crisis, both
the Centre and most of the state governments in India are finding it difficult to cater to
the changing health needs of the growing population. This has forced the governments to
look for alternative options. The country is also passing through a health transition
causing changes in disease pattern load. The global trend towards increasing share of 'for
profit' healthcare and its marketisation through an increasing influence of multinational
corporations across societies is not only intense, but stands firmly consolidated. Changes
affecting the demand and supply sides because of technological advances and
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improvements in access to healthcare technologies, increasing awareness and
expectations of the people, have been equally important and cannot be ignored. Efficient
and effective health care is determined by the way the financing of health care systems is
structured and organised. The health financing system in India is dependent on
government budgetary allocations and private financing. The role of private financing has
increased significantly in recent years. It is estimated that people spend about 4.5% of the
GDP on healthcare needs and this is about three fourths of the health care expenditure
(World Bank, 1998). Most of it is out-of pocket private expenditure, which has grown
at the rate of 12.5%, and for each 1% increase in the per capita income it has increased by
about 1.44%. In the absence of effective regulation of private health services, health care
costs are inevitably high, and it is people belonging to the lower income classes who
suffer the most. In recent times, health care has become almost unaffordable and has
given rise to serious equity issues. Hence it is imperative that we find alternative health
financing mechanisms. The NRHM seeks to provide universal access to equitable,
affordable and quality health care which is accountable at the same time responsive to the
needs of the people, reduction of child and maternal deaths as well as population
stabilization, gender and demographic balance.
Rural Health Care System in India
Rural Health Care System the structure and current scenario. The health care
infrastructure in rural areas has been developed as a three tier system and is based on the
following population norms:
Centre Plain Area Hilly/Tribal/Difficult Area
Sub centre 5000 3000
PHCs 30000 20000
CHCs 120000 80000
Sub-Centres (SCs)
The Sub-Centre is the most peripheral and first contact point between the primary health
care system and the community. Each Sub-Centre is manned by one Auxiliary Nurse
Midwife (ANM) and one Male Health Worker/ MPW (M) (for details of staffing
pattern,). One Lady Health Worker (LHV) is entrusted with the task of supervision of six
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Sub-Centres. Sub- Centres are assigned tasks relating to interpersonal communication in
order to bring about behavioral change and provide services in relation to maternal and
child health, family welfare, nutrition, immunization, diarrhea control and control of
communicable diseases programmes. The Sub-Centres are provided with basic drugs for
minor ailments needed for taking care of essential health needs of men, women and
children. The Ministry of Health & Family Welfare is providing 100% Central assistance
to all the Sub-Centres in the country since April 2002 in the form of salary of ANMs and
LHVs, rent at the rate of Rs. 3000/- per annum and contingency at the rate of Rs. 3200/-
per annum, in addition to drugs and equipment kits. The salary of the Male Worker is
borne by the State Governments. Under the Swap Scheme, the Government of India has
taken over an additional 39,554 Sub Centres from State Governments / Union Territories
since April, 2002 in lieu of 5,434 number of Rural Family Welfare Centres transferred to
the State Governments / Union Territories. There are 1, 45,272 Sub Centres functioning
in the country as on March 2007.
Primary Health Centres (PHCs)
PHC is the first contact point between village community and the Medical Officer. The
PHCs were envisaged to provide an integrated curative and preventive health care to the
rural population with emphasis on preventive and promotive aspects of health care. The
PHCs are established and maintained by the State Governments under the Minimum
Needs Programme (MNP)/ Basic Minimum Services Programme (BMS). At present, a
PHC is manned by a Medical Officer supported by 14 paramedical and other staff. It acts
as a referral unit for 6 Sub Centres. It has 4 - 6 beds for patients. The activities of PHC
involve curative, preventive, primitive and Family Welfare Services. There are 22,370
PHCs functioning as on March 2007 in the country.
Community Health Centres (CHCs)
CHCs are being established and maintained by the State Government under MNP/BMS
programme. It is manned by four medical specialists i.e. Surgeon, Physician,
Gynecologist and Pediatrician supported by 21 paramedical and other staff. It has 30 in-
door beds with one OT, Xray, Labour Room and Laboratory facilities. It serves as a
referral centre for 4 PHCs and also provides facilities for obstetric care and specialist
consultations. As on March, 2007, there are 4,045 CHCs functioning in the country.
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Healthcare development in india
The aim of health financing is to raise sufficient funds and create suitable financial
Incentives so that everyone has access to disease-prevention and the necessary health
care. Proper financing makes it possible to reduce or eliminate the risk of an individual ora household being faced with serious financial difficulties or becoming impoverished due
to having to pay for health care. In the Indian federal set-up with given centre state fiscal
arrangements, the health sector, though a state subject, is jointly managed by the centre as
well as by states. There is a clear demarcation between central and state healthcare
provisioning and financing of various health services. States fully finance hospital
services, primary healthcare facilities. On an average, out of the total government
healthcare spending, the states' share is found above 85 %. The central government while
fully financing the family welfare programmes, finances the national disease control
programmes on a 50:50 basis. The states' share, in fact, rises to about three-fourths as the
state has to bear all the administrative costs including salaries of the staff. Centre and
states share the capital investment equally. Out of the total expenditure on medical
education, research and training, Central government's share is little over 40%. In this
backdrop, it is important to have a quick review of India's healthcare financing situation
in the national and international perspectives. As illustrated by the following points, it is
not very encouraging:
1). The Indian healthcare spending in sharp contrast to a number of other Southeast
Asian countries as regards spending on preventive and promotive care is far less. India
spends only one-third on preventive and promotive healthcare, whereas this proportion is
as high as two-thirds in China and Sri Lanka. Preventive and promotive healthcare
services include: immunisation, antenatal, maternity and postnatal care, contraceptives
and other family planning measures; community based services such as spraying for
malaria, and health education.
2). The spending on primary health care is not only far less, but it is lopsided, too. Out of
the total curative care spending, nearly three-fourths is spent on secondary and tertiary
hospitals--primarily located in urban areas. Given that 70 % of population resides in rural
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areas, the government spends too little on the day-to-day healthcare needs of the rural
Indians. This pattern needs to be reversed.
3). Budgetary allocations at the state level are deplorably low with glaring inter-state
differentials. Also, the composition of health expenditures is such that a major chunk is
spent to meet the recurrent costs of public healthcare delivery system (about 70% of the
total health budget goes for salaries and wages alone).
4). Interrelationships among income (per capita state domestic product), health
expenditure (per capita state health expenditure) and the health status of the population
are strong. The richer states spend higher amounts on healthcare, resulting in raising the
health status of people. On the other hand, the low income states lag behind in improving
the health status of their people as they have neither adequate resources nor could raise
the matching funds for implementation of several centrally sponsored and executed
public health programmes.
5). Indian states the finding of the World Bank cross-country analysis that as countries
get richer, they tend to spend more of their incomes on healthcare, and the government's
share grows larger (World Bank, 1993). In India, in spite of the fact that economy has
grown at around 6 % during the post-reform period (since 1991-92), the government
health spending (in per capita real terms, as percentage of GDP and in relation to other
sectors) has actually declined in the initial years of reforms. This clearly reflects that
health is yet to receive priority in the national resource allocations.
Emerging healthcare financing patterns
The dwindling public health spending and rising requirements to meet dual healthcare
needs--the rising secondary and tertiary curative and super speciality levels and
expanding provision of primary services in the remote areas--are compelling many states
to explore new routes of healthcare financing. The different methods suggested include:
introduction of user fees, public private partnership including the voluntary sector
(NGOs), dual pricing system, increase in the registration fee, effective regulation of
private sector and achieving cost effectiveness through better planning at all levels in the
healthcare system. Among all these aspects, public private partnership (PPP) has assumed
greatest importance. Though the nature and extent of PPP differs a lot across the board,
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its justification is sought on three grounds--better distribution of the financial burden,
improvement in the quality and quantity of healthcare services, and strengthening the
capacity of the private sector. Some successful PPP models which are being practiced in
different states of India are: subsidised infrastructure to open super specialised hospitals;
handing over the management of primary health centre to NGOs; involving industry to
adopt local primary health centres or sub-centres; involving industrial corporate houses to
adopt villages for health improvement; and encouraging and mobilising patients to
organise themselves into health action associations or NGOs (Kumar, 2003). However,
an overall policy-design of many of these aspects relating to PPP is still not clear. It is
quite clear from the above discution that given India's federal framework, the healthcare
provision and financing, evaluated in terms of the relative shares of public and private
household spending, and budgetary allocations made over the period both by the centre
and states is far from satisfactory to address the needs of the poorest sections of the
society. Even the user charges introduced in response to the market oriented deregulation
policies have not helped in revenue mobilisation as the cost recovery in number of states
continues to be insignificant--not more than 2 % to the hospital budget. In order to
understand the future implications of the globalisation process, which is becoming deep
rooted in the Indian economy, particularly given the discouraging healthcare financing
scene, it is important to bring out how the available healthcare system is being used.
Health care financing by government
Current health expenditure in India is estimated to be around Rs. 1030 billion. India
Spends 6 per cent of GDP on health. The share of government is less than 2 per cent
(Tulasidhar 2000). The World Health Organisation has recommended that governments
must spend at least 5 per cent of GDP on the health sector. Bulk of health care spending
is direct out-of-pocket household expenditure.
National health spending: sources and uses (per cent)
Central govt State and localgovt
Corporate thirdparty
House holds outof pocket
PHCs 4.3 5.6 0.8 48
S and Tinpatient care
0.9 8.4 2.5 27
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Non serviceprovision
0.9 1.6 Nill Nill
Total 6.1 15.6 3.3 75
Source: world Bank reports (2000)
Though the demand for health care is increasing owing to population pressure, the
Government is finding it very difficult to maintain its health facilities. Government
allocations are also showing a declining trend over the years Government allocations in
the health sector have declined from 1.3 per cent of GDP In 1990 to 0.9 per cent in 1999
(National Health Policy, 2001). The central Government plays an important role in
supporting national health programmes such as Malaria, TB, etc. Funds for these
programmes are channelled through state governments. These schemes give priority to
primary health care whereas state governments bear the major responsibility of recurrent
costs, especially the cost of operating the hospitals. The significance of alternative
sources of financing has increased significantly. There are four major alternatives for
mobilising resources other than government funds. Community financing: Individuals,
families, or community groups make voluntary Contributions towards meeting healthcare
costs. The cost is shared among members Regardless of individual use. This works out
well for small groups. User fee: This is fee paid for services or out-of-pocket expenses
from users. This helps in improving revenue and rationalises the utilisation in
government systems. However, fee-for service in the unregulated health sector has manyperverse incentives.
Even though public sector spending accounts for less than a quarter of the total
health spending in India, it has a major role in terms of planning, regulating and shaping
the delivery of health services. Such public provisioning is considered essential to
achieve equity and to address the large positive externalities associated with health. As a
result, a vast and widespread public health system grew over time across the country;
there were 137,311 sub-centres, 22,842 PHCs, 3043 CHCs, 4048 hospitals and a
workforce of 345,514 in 2001-02. The way in which the sector is financed determines the
effectiveness of service delivery and requires an understanding of the financing
mechanisms in this sector. Health being a State subject, the sector is financed primarily
by the State Governments. The per capita total health spending was estimated to be
around US$23 during 1997- 2000 (World Bank 2003). As compared to the levels of
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spending by countries such as Sri Lanka (US$31) and Thailand (US$71), the spending in
India is substantially low. A breakdown of health expenditure reveals that expenditure by
the public sector in these countries is twice that of India. Substantially higher levels of
health outcomes in these countries as compared to India clearly indicate that there is a
strong case to markedly increase public sector spending on health, as stated in the
National Health Policy 2002 and the National Common Minimum Programme (CMP)
2004. The primary source of public financing is the general tax and non-tax revenues.
These include grants and loans received from both internal and external agencies, which
face competing demands from various ministries and departments. This pool of resources
is used to finance the Centres and States own programmes. The Central Government
plays a catalytic role in aligning the States health programmes to meet certain national
health goals through various policy guidelines as well as financing certain critical
components of centrally sponsored programmes implemented by the State Governments.
In addition to tax revenues, a meager amount is also raised through user charges, fees
and fines from the sector, and further supplemented through grants and loans received
from external sources. In the case of local governments, the respective State
Governments largely finance their health programmes. Local governments do raise
resources through user charges and certain fees though the quantum varies widely from
States to States. Overall, the sector is underfunded, not without consequences.
Role of the NRHM in Healtthcare finance
The Mission seeks to provide universal access to equitable, affordable and quality health
care which is accountable at the same time responsive to the needs of the people,
reduction of child and maternal deaths as well as population stabilization, gender and
demographic balance. The NRHM derives its cost norms from three sources: (i) existing
norms of schemes brought under the umbrella of NRHM; (ii) norms and (iii) standards
developed by the National Commission on Macro Economics and Health; A diverse set
of norms are expected to provide flexibility to States in planning and to accommodate
interventions/innovations as required for meeting local needs. For achieving program
efficiencies, the National Disease Control Programmes related to control of TB, Malaria,
Blindness, Iodine Deficiency, and Kalazar. The Integrated Disease Surveillance
Programme and all the Family Welfare Programmes of the Ministry of Health and Family
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Welfare have been integrated under the NRHM. Financial integration is proposed by
creating a single Budget head for NRHM, while other disease control programs such as
Cancer, non communicable diseases, HIV/AIDS prevention etc. will converge their
programs with the NRHM interventions. Such integration is expected to bring down
duplication of services and make better use of existing resources. Optimizing existing
resources and infrastructure will alone release an estimated 30% of existing budgetary
outlays for alternative use. The National Commission on Macro Economics and Health
has provided the cost of a package of services to be provided at the primary and
secondary levels of health care facilities. The core and basic package include childhood
diseases/health conditions, maternal diseases/health conditions, blindness, leprosy, TB,
Vector borne diseases, preventive and promotive activities, minor injuries, other minor
ailments, and snake bite. The NCMH also provides standard costs for non-recurring and
recurring costs of Sub Health Centres, PHCs, and CHCs. The Ministry of Health and
Family Welfare has developed IPHS for SHC/PHC/CHC and is in the process of
developing IPHS for Sub Divisional and District Hospitals. The NCMH assessments,
read with the IPHS and the actual Facility Survey of each health facility, will determine
the actual resource need. The over all resource envelope for NRHM has been projected
as per assessment of NCMH, which is in line with the CMP promise of raising public
expenditure on health to 2-3 % of the GDP. Specific norms have been proposed for
untied grants at al levels of health action. These include (1) grants to Panchayats/Rogi
Kalyan Samitis; (2) capacity building in community organizations; (3) skill needs of
doctors/Para medics/educated RMPs; (4) local criteria and need based selection of
resident health workers/Nurses/Doctors/Specialists as per IPHS; (5) partnerships with the
Non Governmental sector; (6) nurturing and development of ASHAs; (7) strengthening
of Block and district level management; (8) improving physical infrastructure for health;
(9) grants to Rogi Kalyan Samitis at PHC, CHC, Sub Divisional, District Hospital in all
States and to Government Medical centre and Hospitals in special focus States; (10)
grants in-aid to NGOs at district, state and national levels; (11) support for school
health programmes/ ICDS health component, nutrition and health education programmes
for women, resources for surveys, public reports on health, etc.; (12) Social health
insurance as per local models with subsidies only for Below Poverty Line Families at par
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with the current limits under the Universal Health Insurance Scheme; (13) strengthening
nursing institutions/Medical centre in capacity development; (14) Ambulances and
phones at al levels; (15) National and State level Health System Resource Centres and
District and Block level resource Groups;(16) meeting diversity of northeastern States. A
substantial share of the additionality indicated above will have to come from Central
funds. It is proposed that NRHM provide 100% grants to States on a 75-25 sharing basis
between the Center and States during the XIth Plan. The long term additional funding by
the Central Government will significantly improve the central share in overall public
expenditure on health. While doing so, the Central Government will constantly monitor
the state expenditures on health to ensure that they increase in proportion to central
spending in real terms. Given the absorptive capacity in the States and the time it may
take to improve the implementation capacity, it should be fair to assume an annual 30%
increase in health sector allocations up to 2007-08 and an annual increase of 40% from
2009-201o to 2011-12. Following this broad assessment, the Central Government
resource needs are likely to be as follows:
Projected Resource need for NRHM 2005-2012Rupees in crores
years Central govt NRHM allocation
Recurring Non-Recurring
StateContribution
Total
2005 - 06 6500 - - - 6500
2006 - 07 9500 9000 500 - 95002007 - 08 12350 11000 1350 2179 14529
2008 - 09 17290 13000 4290 3051 20341
2009 - 10 24206 16206 8000 4272 28478
2010 - 11 33884 23884 10000 5980 39864
2011 - 12 47439 42439 5000 8372 55811
Source:NRHM Report 2006
The resources indicated above relate to communicable disease control programmes,
RCH, Family Planning, IDSP (Integrated Disease Surveillance Programme) etc.
programs that come under the NRHM. There is need to, however, also provide anestimate of resources required for the non-communicable disease control programmes
(mental health, vascular diseases, cancer, etc.), HIV/AIDS, medical education, etc. Since
the non-communicable diseases do not entail any externalities, normally public funding is
not provided in a significant manner. However, with evidence suggesting increasing
prevalence of hypertension, mental health, accidents & injuries affecting a large number
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of poor and the treatment under all these conditions being exorbitant, public health
financing has to take into account provisioning of free treatment in all public health
facilities for these diseases/conditions. It is accordingly recommended that 20 per cent of
the total amount projected in the table above may be provided additionally for tertiary
care which may also include medical education and research.
Need for new avenues of health financing
The NRHM working Group expressed its desire to explore new health financing
mechanisms in order to reduce the burden of health expenditures among the poor
households. The National Commission on Macroeconomics & Health has pointed out that
3.3% of Indias population is impoverished every year on account of health distress.
There is also evidence to suggest that the poorest 10% of the population rely on sale of
assets to meet their health care needs. A study in some of the poorest districts by some
states 2002 had revealed that illness of a family member is the most common reason
among poor households leading to a financial crisis and causing a sense of insecurity.
Nearly 40% of the Below Poverty Line families reported having faced a financial crisis
during the last two years and about 69% of these was on account of illness and 11% on
account of a death of a family member. Clearly poor people in rural areas are spending
significant amounts on health care leading to their impoverishment.
Need for participation of government funded public health institutions
The Group deliberated on the participation of Government Health Care facilities in any
innovative risk pooling arrangement. The Group felt that the participation of Government
Hospitals and Health Centres was very critical for any risk pooling arrangement as
otherwise it becomes a system of subsidizing private health care. It was also felt that the
challenge of risk pooling for remote rural households can only be met when public health
systems are also a part of such innovative health financing mechanisms. Any kind of
Health Insurance Scheme, which does not involve the public medical facilities, would not
succeed because, in majority of states, these are the only facilities available in rural areas.
The involvement of the States could be worked out by designing a Plan Scheme by the
Ministry of Health and Family Welfare with subsidy being passed on to the hospitals
through the State Governments. In such a situation, the State Governments can invite bids
on premium to the charged at their level from all the insurance companies, both public
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and private. For availing of the subsidy from the Central Government, the minimum
features of the Scheme could be decided a priori and informed to the State Governments.
The State Government may add some more features to the scheme and may also provide
financial assistance to the policyholders by contributing whole or part of the premium. In
this scenario, the modalities of administering the scheme at different levels may be
described in detail by the Central Government or may be left to the State Governments.
Innovative financing for efficiency
Innovative mechanisms of health financing can be used to improve accountability of the
health system, be it in the public or private sector. For example if a CHC were to receive
resources directly on the basis of their case load, it would contribute to a more effective
service delivery. Similar would be the case of the private sector. For involving the
private sector as a provider of care paid for by a public financing system, there is need to
establish effective standards, capacity to monitor their enforcement, and a regulatory
framework for ensuring that providers did not exploit the market imperfections so
inherent in the health sector. The work of the National Commission on Macroeconomics
and Health on unit costs for core, basic and secondary health care package alongside the
facility survey of the public and private sectors in some districts could be a useful starting
point for developing standard cost and treatment protocols and a basis for public private
partnerships in health service delivery.
User Charges
Among the various financing options to fund recurrent costs, user charges remain the
most controversial. The possibility of their implementation in the public sector was put
primarily on the policy agenda following the World Banks policy document on
Financing Health Services in Developing Countries: An Agenda for Reform in 1987. The
economic rationale behind the imposition of user fees emphasises that: i) payments for
services will discourage frivolous use of health facilities; ii) by making payments
consumers will become conscious of quality and will demand it and iii) the greater funds
availability of funds through user fees at the point of service will increase both the
availability and quality of services (Griffin, 1987). However, in practice the positive
benefits envisaged through user charges did not materialise or were over-shadowed by
other negative unintended outcomes. The socially regressive impact of user fees in
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particular has been prominently highlighted in the experience of most of the developing
countries. The exhaustive reviews by Creese (1991) summarise the experiences of user
fees in many Asian and African countries. It has been found that owing to exemptions for
indigent and the poor, the user fees cannot recover the entire recurrent costs. The
proportions of cost recovery in terms of gross yield vary between 5-15 percent. In terms
of the total budget of health ministry, for instance, the collections from user fees may be
as low as 3 percent. Studies in different countries for the most part indicate a dampening
impact of user fees on the utilisation of health services. The decline in pre-natal contacts
were around 11 percent. Generally it is the poor who tend to respond negatively to price
increases thereby affecting equity. The study results indicate higher sensitivity to the
costs of diagnostic services relative to registration fees. Further, the vulnerability owing
to user fees has been focussed on certain age groups and types of diseases. Following the
reforms in 1980s, in China the emphasis on user fees to obtain self sufficiency in health
service finance has also been associated both with a regressive impact on utilisation and
with wasteful investment on inappropriate high-tech equipment. The study by Mcpake
(1993) found that in most countries examined the incentives created by the pricing
structure of these initiatives and the lack of appropriate exemption mechanism to protect
vulnerable groups were the problem areas. Cost increases to patients by user charges can
be partly mitigated by supply-side cost sharing cost control and containment measures. It
has been pointed out by Hodgkin and Mcguire (1994) that to pay providers in advance on
the basis of the average cost of treating groups of diagnostically related illnesses would
make providers more cost conscious and thus cost reduction or containment will take
place.
Literature Review
Ravi Duggal (2004) in his article India is the most privatised health market in the world.
Public support for healthcare has been historically low in India, averaging less than 1 per
cent of the GDP, but what is worse is that in the last decade public health investment and
expenditure has seen a secular declining trend. During the same period the private health
sector grew rapidly, from being about 3 per cent of GDP in the beginning of 1990s to
over 5 per cent today. In fact, the health sector has been growing at the rate of 1.4 times
that of the GDP. This also means that the burden out-of-pocket on households is also
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increasing rapidly and more so for the poorer sections, especially since the public health
expenditures are declining. The total value of the health sector in India today is over Rs
1,500 billion or US$ 34 billion. This works out to $34 per capita which is 6 per cent of
GDP. Of this 15 per cent is publicly financed, 4 per cent is from social insurance, 1 per
cent private insurance and the remaining 80 per cent being out of pocket as user-fees (85
per cent of which goes to the private sector). Two thirds of the users are purely out-of-
pocket users and 90 per cent of them are from the poorest sections. The tragedy is that in
India, as elsewhere, those who have the capacity to buy healthcare from the market most
often get healthcare without having to pay for it directly, and those who are below the
poverty line or living at subsistence levels are forced to make direct payments, often with
a heavy burden of debt, to access healthcare from the market. National data reveals that
50 per cent of the bottom quintile sold assets or took loans to access hospital care. Public
financing of healthcare comes largely from state government budgets, about 80 per cent,
and the balance from the Union government (12 per cent) and local governments (8 per
cent). Of the total public health budget today, about 10 per cent is externally financed in
contrast to about 1 per cent prior to the structural adjustment loan from the World Bank
and loans from other agencies. Private financing is mostly out-of-pocket with a large
proportion, especially for hospitalisations,
D. Narayana K. K. Hari Kurup (2000) highlighted the changing scenario of the healthcare
financing in India in the wake of globalisation process initiated during early 2000s and
the structural changes taking place in the health sector. the health sector in India and
raises issues related to accessibility, efficiency, and quality of the health delivery in the
face of glaring inter-state variations and discouraging healthcare financing situation. The
rising health needs particularly in the backward and low income states, sluggish health
outcomes, dwindling budgetary allocations and heavy household out-of-pocket
expenditure on health pose serious challenges to healthcare financing in India, different
issues for the financing of health care in India, where the effect of structural adjustment
has been to undermine the traditional resource base. The relative merits of user fees,
insurance schemes, administrative decentralisation, taxes and partial privatization are
discussed. The impact of this expenditure reduction is also being felt on the health care
sector. The central grants to states declined from 19.9 per cent to 3.3 per cent. The impact
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of this decline is most noticeable on specific purpose central grants for public health and
disease control programmes. The impact of this falling share of central grants was more
pronounced in the poorer states which are unable to raise local resources to compensate
for this loss of revenue. mainly the approach of the resource base of the health care
sector: I) to adopt the system of cost recovery at the secondary and tertiary level health
institution; ii) to adopt other innovative financing mechanisms including specific
taxes,cesses, local levies and community level endowment funds supplementing public
funding and provision of public health services; iii) to initiate suitable health insurance
coverage with appropriate public private mix; iv) adopt another mode of health care
delivery where the government encourages private sector participation by taking up the
role of public purchaser of private services. The healthcare financing system in India is
dependent on government budgetary allocations and private financing. The role of private
financing has increased significantly in recent years. It is estimated that people spend
about 4.5% of the GDP on healthcare needs and this is about three fourths of the health
care expenditure. Most of it is out-of pocket private expenditure, which has grown at
the rate of 12.5%, and for each 1% increase in the per capita income it has increased by
about 1.44%, this study seeks to analyses decentralisation of the health care sector in
India.
Melitta Jakab and Chitra Krishnan (2001) To reviewed the literature to date on
community financing in order to explore what community financing is assess the
performance of community involvement in health Financing in terms of the level of
mobilized resources, social inclusion, financial protection; and establish the determinants
of reported performance results, including technical design characteristics, management,
organizational, and institutional characteristics: Community financingis an umbrella termused for several different resource mobilization instruments. The instruments vary in the
extent of their prepayment and risk sharing, in their resource allocation mechanisms,
organizational and institutional characteristics. Nevertheless, the common features they
share include the predominant role of the community in mobilizing, pooling and
allocating resources, solidarity mechanisms, poor beneficiary population, and voluntary
participation. Performance of community-based financing. (I) Community financing
mechanisms mobilize significant resources for health care. However, there is a large
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variation in the resource mobilization capacity of various schemes. This review did not
find systematic estimates about how much community financing contributes to health
revenues at the local and/or national level. (ii) Community financing is effective in
reaching a large number of low-income populations who would otherwise have no
financial protection against the cost of illness. There is large variation in the size of
various schemes. At the same time, there are no estimates about the total population
covered through community financing. There are indications that the poorest and socially
excluded groups are not automatically reached by community financing initiatives. (iii)
Community-based health financing schemes are systematically reported to reduce the
out-of pocket spending of their members while increasing their utilization of health care
services. The reviewed literature is very rich in describing the phenomenon referred to
as community financing in terms of scheme design and implementation. Although this
review found several systematic patterns of performance, there continues to be a need for
a stronger evidence base regarding the performance of community-based resource
mobilization mechanisms as health care financing instruments.
NRHM working group report (2006) The Working Group on Health Financing initiated
the deliberations keeping in mind the need to ensure an equitable and efficient health
system through the rational use of resources. In reviewing the present position of health
financing and the existing system of health financing in the country (NCMH 2005), The
WG also reviewed the health spending estimates as provided under the National Health
Accounts framework for the year 2001-02 and later reiterated by the Ministry of Health
The Report of the Task Force on Innovative Health Financing Mechanisms under the
NRHM (December 2005). The Report recommended the need to develop systems for risk
pooling for obtaining access to medical services from the public and private facilities in
accordance with commonly agreed standards and prices. Based on this the Ministry of
Health & Family Welfare has developed a framework for Community Health Insurance
advocating a policy of different approaches being adopted as far as risk pooling and
community health insurance is concerned. Approval of the detailed Framework for
Implementation of the National Rural Health Mission (July 2006). The approval includes
in principle agreement on financial resources for the NRHM 2005-2012 in line with the
commitment made in the Common Minimum Programme and the recommendations of
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the NCMH, providing for an annual increase of 30-40% Central Government allocation
and 10% by States. Government has in the last one year initiated several
interventions under the National Rural Health Mission (NRHM) in 4 key
areas that when implemented will have a significant impact on
reducing current inequities in health care financing and access.(1).
Decentralized planning under which every district is expected to prepare a perspective
and an Annual District Health Action Plan 2005-2012, projecting the basic health care
needs of local communities, integrating also the wider determinants of health and
combining promotive, preventive and curative care in a common referral link that perates
from the village to the District Hospital. This process is based on the principle of
decentralization of funds and functions to Panchayat Raj institutions and locally elected
bodies, hospital committees in partnership with community organizations and Village
Health and Sanitation Committees and broader civil society; (2). Strengthening of
management capacity at all levels, with equal emphasis on skill development and
development of the required human resources for coping future health challenges; (3).
Improved financial management by providing flexibility and making it Performance and
outcome based; (4). Improved delivery of services based on the recognition of the need
to guarantee a minimum package of services to every citizen at all the levels of care;
Analyses of rural healthcare financing1. The central government while fully financing the family welfare programmes,
finances the national disease control programmes on a 50:50 basis. The states'
share, in fact, rises to about three-fourths as the state has to bear all the
administrative costs.
2. Indian states the finding of the World Bank cross-country analysis that as
countries get richer, they tend to spend more of their incomes on healthcare, and
the government's share grows larger.
3. The different methods suggested include: introduction of user fees, public private
partnership including the voluntary sector (NGOs), dual pricing system, increase
in the registration fee, effective regulation of private sector and achieving cost
effectiveness through better planning at all levels in the healthcare system.
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Among all these aspects, public private partnership (PPP) has assumed greatest
importance.
4. The way in which the sector is financed determines the effectiveness of service
delivery and requires an understanding of the financing mechanisms in this sector.
Health being a State subject, the sector is financed primarily by the State
Governments.
5. The primary source of public financing is the general tax and non-tax revenues.
These include grants and loans received from both internal and external agencies,
6. The National Commission on Macroeconomics & Health has pointed out that
3.3% of Indias population is impoverished every year on account of health
distress. There is also evidence to suggest that the poorest 10% of the population
rely on sale of assets to meet their health care needs.
7. The work of the National Commission on Macroeconomics and Health on unit
costs for core, basic and secondary health care package alongside the facility
survey of the public and private sectors in some districts could be a useful starting
point for developing standard cost.
Conclusion
1. India's considerable development in the health sector is still under stress. Issues
related to accessibility, efficiency, and quality of healthcare delivery in the face of
glaring inter state variations continue to haunt the policy makers.
2. In addition, India is passing through demographic and epidemiological transition
and non-communicable diseases are emerging as major health problems. In the
face of the rising healthcare needs of the population and the concern for the poor,
3. The globalisation policies while squeezing budgetary support both by the centre
and states have forced governments to look for alternatives in healthcare
financing.
4. The health-financing situation in India is not very encouraging. Indian healthcare
spending, particularly on preventive and promotive care is poor. With rising
interstate disparities, and deplorably low and dwindling budgetary allocations at
the state level, households are forced to incur heavy out-of-pocket expenditures
on healthcare.the issues is How to meet the rising healthcare requirements of the
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people, who are poor and residing in remote areas, when affordable public sector
secondary and tertiary levels hospitals equipped with hi-tech curative and super
specialty equipment are not developed,
5. The private sector is loathe to provide healthcare services at subsidized rates in
these areas--is the major challenge before the country. Public private partnership
is being considered an important alternative but an overall policy blueprint is still
not in place.
6. The implementation of the above process would be critically dependent on the
state and central government agreeing to changing the financing mechanism and
giving complete autonomy to district panchayatand health institutions. With thefinancing mechanism in place, both panchayatand the health bureaucracy districtauthorities would require appropriate capacity building to manage the
restructuring of the healthcare system.
7. Private health providers and their associations will have to be brought on board at
an early stage through discussions that explain to them the benefits of joining
such a system. Those serving in public health institutions will have to be trained
and appropriately informed to manage and run such a system. Above all, local
governance bodies and civil society groups will have to be oriented and become
skilled in planning, monitoring and auditing the functioning of the system.
8. It is important to re-emphasize that healthcare is a public good and not to be left
to the vagaries of the market. Instead, it should be organized and regulated, using
both public and private resources, for social benefit. Furthermore, the delivery of
healthcare should be decentralized at an appropriate community level rather than
(as at present) planned at the central or state level. The role of the centre and the
state should be to formulate strategies, mobilize and disburse resources, and
monitor outcomes.
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