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Govt’s FY19 health spending dropped: what the accounts show

Government spending on health as share of total spending is up, but overall expenditure on health is down. Out-of-pocket health spending is lower, but people are still spending more than the government

Healthcare staff wait to receive patients at the entrance of Covid-19 ward at Civil hospital, Asarwa in July 2021. (Express Photo: Nirmal Harindran, File)

Government spending on health as a proportion of the total health expenditure in the country has been rising in recent years, even as the overall expenditure on health has declined, official data released this week show.

According to the National Health Accounts Estimates 2018-19, government spending as percentage of total health expenditure increased by more than 11 percentage points over the previous five years, from 23.2% in 2013-14 to 34.5% in 2018-19.

The National Health Accounts (NHA) Estimates describe the country’s total expenditure on healthcare — whether by the government, the private sector, individuals, or NGOs — and the flow of these funds. It answers questions such as what are the sources of healthcare spending, who manages this spending, who provides healthcare services, and which services are utilised.

Main findings of report

One of the most important findings of the 2018-19 report is that government spending as proportion of the country’s Gross Domestic Product (GDP) went down to 1.28% from 1.35% in the previous year’s(2017-18) report. The total health spending — which includes spending by both government and non-government agents — declined from 3.9% of the GDP to 3.2% in the five years up to 2018-19.

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“The decrease in the government spending as percentage of GDP was bound to happen because we are using a wrong indicator that is internationally not comparable. The comparable indicator would be the current health expenditure, which does not include the capital spending on, say, building or equipment that will be used over multiple years till they last, Dr Indranil Mukhopadhyay, health economist and professor at the School of Government and Public Policy at O P Jindal University, said.

“Since we consider the total expenditure, what happened is the previous report also considers the large spending by the Defence Ministry on equipment. But that was a one-time spending, hence the total public spending has reduced,” Dr Mukhopadhyay said.

More importantly though, the 2018-19 report shows that the massive fall in out-of-pocket expenditure by patients at the point of care recorded in the previous report, has sustained.

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Key numbers in report

Out-of-pocket expenditure

With healthcare services in the country being largely provided by private players, one of the most important health accounts measures is the out-of-pocket spending. And here, the figures have been moving in the right direction. People paying for healthcare expenses out-of-pocket made up for 48.2% of the total health expenses in the year 2018-19, down from 48.8% in the previous year (2017-18). The out-of-pocket expense has decreased substantially from the 62.6% recorded in 2014-15.

This fall is good because India’s out-of pocket expenditure continues to be high in comparison to other countries in the region. In 2017, India was in 66th position out of 189 countries, with $100.05 per capita out-of-pocket spending, according to data from the Global Health Expenditure Database (annexured in the report). Other Asian countries performed better: Bhutan was at No. 37 with $47.3, Bangladesh at No. 52 ($74.77), Thailand at No. 54 ($79.46), Pakistan at No. 55 ($79.92), and Nepal at No. 63 ($96.59).

Out-of-pocket expenditure was the highest in the developed countries, with the United States ranking 185 ($1151.94), and the United Kingdom 167 ($755.72). At the top — No. 189 — was Switzerland, with $2,109.74.

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Despite the drop in India, however, out-of-pocket expenditure for the year 2018-19 stood at 2.87 lakh crore, which was equivalent to 1.52% of the GDP for the year. This means people spent much more than the government, with all its health schemes and new hospitals, spent on healthcare that year.

Experts, however, expressed concern that although the indicator is moving in the right direction, there was a 10 percentage point decline in last year’s report (from 58.7% in 2016-17 to 48.8% in 2017-18) which remains unexplained. “There is no on-ground explanation for the drastic drop in out of pocket expenditure, so we need to look at the methodology. This drop has been worrying many,” said an eminent health economist who declined to be named.

Dr Mukhopadhyay said, “The out-of-pocket expenditure dropped suddenly in the previous year’s (2017-18) report, while there wasn’t any substantial increase in, say, government spending or insurance coverage. So what happened? If we look closely at the NSSO data (from which this study derives information on out-of-pocket spending), we see that the total health expenditure and the out-of-pocket expenditure has dropped because fewer people are seeking care. That is counter-intuitive because it means there is enormous distress in the system where people need health services but they aren’t seeking it.”

He added that in other countries where a fall in out-of-pocket expenditure was seen together with increased government spending, there was an increase in the number of people seeking care.

Also, Dr Mukhopadhyay said, the data collection is such that it does not capture the spending by the richest 5% of the country, thereby leaving out a big chunk of out-of-pocket expenditure from the estimates.

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Current health expenditure

The current health expenditure — not accounting for any expenses that can be utilised over a few years — stood at Rs 5.4 lakh crore, which was 90.6% of the total health expenditure. As Dr Mukhopadhyay pointed out, with large purchases of equipment, the proportion of this current health expenditure had in fact, dipped to 88.5% in the previous year’s report, which was the first time it fell below 90% since 2004-05 (the 14-year period for which there are data in the report).

So, who paid for the current health expenditure? The Centre’s share in the current health expenditure stood at 11.71%, state governments accounted for 19.63%, local bodies 1.01%, and households (including insurance contributions) 60.11% of the current health expenditure. The rest was accounted for by corporates (as insurance contributions), NGOs, and external or donor funding.

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Of the total current health expenditure in 2018-19, 34.5% went to in-patient care, 18.9% to out-patient care, 0.77% to day-to-day curative care, 3.5% to patient transportation, 4.17% to laboratory and imaging services, 18.87% to prescribed medicines, and 3.49% to over-the-counter medicines that can be purchased without prescriptions. Preventative care accounted for 9.44% of the current expenditure.

The rest was utilised for therapeutic appliances and medical goods, governance of health system and administrative costs, and ‘others’, according to the report. Facility wise, current health expenditure on primary care was 47.4%, secondary care 31.7%, and tertiary care 14.9%. The rest was utilised for governance and supervision, and ‘others’.

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What did the government spend on? The total government health expenditure, which is spending by any government body for any purpose, for the year stood at Rs 2.42 lakh crore, and accounted for 40.6% of the total spending on healthcare. The government’s share in the total expenditure has increased by over 11 percentage points in five years, from 29% recorded in 2014-15.

First published on: 15-09-2022 at 04:15:53 am
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