The Union health ministry released the National Health Accounts (NHA) for India for the years 2020-21 and 2021-22 earlier this week (25th September). Some improvements have been made to the methodology used and the report states that the figures for the earlier years have also been adjusted accordingly to make them comparable.
The NHA 2021-22 shows that some of the positive trends that have been reported over the last few years, such as increase in the government health expenditure as a proportion of GDP and decrease in share of out-of-pocket health expenditure (OoPE) continue. While these are indeed welcome developments, there is a need for further investigation before we celebrate. Some of the figures are puzzling and more disaggregated analysis needs to be put out for us to understand these trends better.
According to the NHA, the share of government health expenditure (GHE) in GDP has increased from 1.35% in 2017-18 to 1.84% in 2021-22 and as a share of general government expenditure (GGE) it has increased from 5.12% to 6.12%. The share in total health expenditure (THE) has increased from 40.8% to 48% during the same period. However, budget documents reveal that the Union budget on health (the budget of the Ministry of Health and Family Welfare) as a proportion of the total Union budget has declined from 3.7% to 2.3% during the same period. Even as a percentage of the GDP, the Union health budget has seen a decline from 0.48% in 2017-18 to 0.37% in 2021-22.
Moreover, it does not seem that the state governments have compensated for this decline. The NHA also shows that the Union GHE as a percent of total GHE has slightly increased from 40.8% to 41.8% during this period, with the state share commensurately declining from 59.2% to 58.2%.
How is it that with declining share of direct expenditure on health in the Union budget along with increasing share of Union expenditure in comparison to state government expenditure, that we are seeing such a substantial increase in the government health spending as a proportion of GDP and GGE?
Moreover, an earlier analysis of Union and state budgets has shown that it is the states that have contributed to some rise in public spending and not the Union.
Secondly, we also need to remind ourselves that even if these numbers are accurate, the government spending on health is still quite low in India. By our own targets, at least 2.5% of GDP was supposed to be spent on health by 2025. Globally, the World Bank database shows that the average domestic general government health expenditure as a percent of GDP is 2.81% among middle-income countries and 8.6% among high income countries. The total health expenditure as a proportion of GDP at 3.83% in 2021-22 is also low compared to global averages, with the average for low- and middle-income countries being 5.44%.
In fact, the trend in the total spending on health as a proportion of GDP – including government, private insurance, household and other sources – also needs some further explanation.
Also read: Healthcare for the Elderly: Is Insurance the Best Solution?
THE as a proportion of GDP in India went down from 3.31% in 2017-18 to 3.16% in 2018-19. This was in continuation of the declining trend seen in earlier reports. THE as a percent of GDP declined from 4% in 2013-14 to 3.16% in 2018-19, with a sharper decline after 2016-17 (3.8%), NHA 2018-19 shows.
There now seems to be a revival with an increase from 2018-19 onwards (from 3.16%) to 3.83% in 2021-22. This could of course also be a result of the increased spending during the pandemic years, following a decline during the immediate aftermath of the demonetisation as many have argued. On the other hand, the increase also needs to be seen in the context of the lower GDP during the covid years and therefore a lower base.
Out of pocket expenditure
While OoPE is declining, its share remains high: 45% of current health expenditure comes from out-of-pocket payments, compared to the global average of 17% and 34% for low- and middle-income countries. How well we are capturing OoPE is also a matter of concern.
The data used in this report is from the National Sample Survey’s (NSS) health expenditure survey conducted in 2017-18. Therefore, it does not capture the pandemic years. The quality of the NSS data in estimating health expenditure also needs a lot of improvement. Some expenses such as regular costs of medicines and diagnostics for those with chronic ailments are not included. Another well-known problem is that of the underestimation of the rich in these surveys – owing to lack of cooperation from respondents or getting access to gated complexes – which would have a significant implication for estimates of total health expenditure.
The NHA 2021-22 also shows that the share of private health insurance is rising. As a share of THE, the share of private health insurance has increased from 5.8% in 2017-18 to 7.4% in 2021-22 and the share of social security health expenditure has gone down slightly from 9% to 8.7%. We are all quite familiar with the concerns related to private health insurance – many costs are not covered, reimbursements are not easy, contracts are opaque and one has to cross many bureaucratic hurdles to get the benefits. In the case of private health insurance, issues of access, transparency, accountability and regulation are yet to be resolved.
The NHA report clearly states that, “Policy implications of healthcare expenditure estimates are not discussed in this report. However, policymakers, academicians, and researchers are free to draw inferences from this report…” This preliminary analysis is in this spirit and calls for more detailed data as well as analysis on health financing in India.
Health policy in India is finally becoming a part of mainstream discussions and this is a welcome development. At the same time, there is a need for some decisive action on the kind of health system we want to work towards. The core of the debate remains one between a strengthened public health system, financed and provided by the government (tax-financed) and a largely private sector dependent health system financed through different sources including the government. While efficiency considerations as defined by the markets are driving many of our health decisions, it needs to be remembered that the priority in a country like ours should be on ensuring health for all in an equitable manner.
Dipa Sinha is a development economist.
