Financing Health Care In India Economics Essay

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Well known deficiencies in the financing of the Indian health care system are the cause of insufficient provision, high quality health services and inadequate financial coverage against ill health for the people of India especially the poor in the rural areas which comprise the majority of population (75 per cent). Public health spending of 0.94 per cent of gross domestic product in the year 2004-2005 is considered to be the lowest in the world and the main reason for private expenditures accounting for about 78 percent of total spending on health in India. The health services available in the public sector with a nominal cost are inadequate resulting in seeking of private health sector by the people which is highly unaffordable and impoverishing (see7,3backref). Low public health spending by the Government per person in India was about 22 per cent of Srilanka, 16 per cent of that in China and a very poor 10 per cent figure of that in Thailand. Despite the tremendous increase in the economic growth and collection of taxes per person, there has been no increase in the expenditure on health by the government of India (WHO, 2008See 7,18). The cost of medical care has been increasing at a rapid rate and in the absence of medical insurance in India. Even the public health facilities are not sufficient to provide absolute free treatment as one has to spend money on specific tests and procedures like CT scans, though the cost is minimum but still one has to pay. Though the Government of India has committed to increase the public spending on health to 3 per cent of gross domestic product in the coming few years but till date the problem with the finances in health exists in the country.

Financial protection

It has been estimated that only about 10 per cent of households in India had atleast one member covered under medical insurance. The health sector remains weak and fragmented despite of the various national insurance schemes functioning by the central and state governments and community based organisations. For instance the insurance scheme introduced since 1954 til date offers free medical insurance to only a few privileged people like the government employees and their families, members of parliament and judges in the high court’s and the supreme courts. In the same manner the employee State insurance scheme which was introduced in the 1948 provides cash and medical benefits to only few selected categories of employees in working in the factories in which at least ten people are employed. These schemes do not cover even one third of the population of India and especially the individuals living in the rural areas as they are a very few number of them working in the government sector (Rao,2004 see7,23). The absence of financial protection by the government and the rising costs of the health care in India has been dissuading many people from accessing much needed health care especially of the rural areas as seen in the year 2004 that 28 per cent of health ailments in the rural areas went untreated due to this issue (Ministry of Health and Family Welfare India, 2007 see7,29).

India has thousands of sub health centres, primary health centres and community hospitals run by the government but poor quality services, wastage, corruption and lack of management leads to failure in the health delivery at every level. Many a time’s public funds remain unused or used inefficiently by most of the States.

State differences in Financing and outcomes

There is a high variability among the states of India in health financing, outputs and outcomes. Generally the States of the South region of the country is better than the North states in financing output and outcomes. For instance the difference between Kerala (south) and Bihar (north) in health financing is nearly three times. This means the government is investing more in such states and it can be further seen that the availability of infrastructures and facilities makes 75 per cent of children of Kerala fully immunised than that of Bihar State which has less than a third are immunised, also the majority of babies in Kerala are born in the medical facilities whereas only about 20 per cent in case of Bihar state. Moreover the investment by the government in case of equipment and staff is much below in Bihar than Kereala. In the same manner the two states of Tamilnadu (South State with good health care) and Madhya Pradesh (North State with poor health) show that that the quantity and composition of expenditure on health care affect both the efficiency and effectiveness of health spending. On one side the public health spending in the State of Tamil Nadu is much more than Madhya Pradesh leading to a better provision, reach and use of public health facilities in Tamil Nadu than in Madhya Pradesh (Berman and Ahuja,2008see7,3). On the other side the contrast in the composition of spending are substantial between these two states. It has been seen that large amounts of public health expenditure is paid as wages to the employees as a result the poor states have shortage of funds. the amounts saved in case of the Southern States are spent on purchase of drugs and on other health care needs. T has also been seen that about 95 per cent of people of Tamil Nadu state receive free surgeries as compared to low 55 per cent in case of Madhya Pradesh similarly 79 per cent receive free drugs in Tamilnadu as compared to 9 per cent people in Madhya Pradesh. Moreover more amount is sent on health education and research in South states than the North states of India(see journal 7 backref11 and 12).

Many other factors other than amounts and patterns of health financing by the government such as social determinants and investments in non health sectors affect the effectuality and results of health expenditures. In the State of Tamil Nadu (rural and urban) higher amounts of per person annual incomes, low poverty and higher education among the woman which leads to improved health seeking behaviour and better physical infrastructures than the North States such as Madhya Pradesh of the country where the situation is completely opposite. The factors responsible for better health in some states are strong political backing up, problem solving approach of health bureaucracy and a commitment of universal health coverage rather than individual schemes. More importantly these states pay special attention to overcoming social barriers and bridging social distances. Therefore the ministry of health in India needs to look in to this matter of differentiation among the states (World Bank, 2006 see7 ,38).

Centre-State financing issues

Although the state governments are primarily responsible for the funding and the delivery of health care services, yet the amount and type of public health finance is determined by the State and the Centre government. The State government contribute about 64 per cent of the total health expenditure whereas the centre government is responsible for the remaining third.despite of the small contributions the the central governments influence can be substanitial. Amny of the State governments donot tgive much importance to health. Analyses with regard to the public expenditures show that in all the states in the country except Gujarat and Uttarpradesh and to a minor extent Bihar-the quantity of government development expenditures allocated to health care decreased or remained almost same from the years 2001-2002 and 2007-2008 (Ministry of health India,2009see7,5).

There are other issues of lack of suffiecient political commitemnets by the government and the limitations in the administrative process which doesnot give priority to health in th estates. Other than this the states with low public expenditures distinctively constrained in financial matters by two factors. Firstly the centres contribution of funds for health donot offset the fiscal deficits of the poor states. Secondly the fiscal space for the spending on development for these majority of States is much less than required and therefore these incur an enormous share of the obligatory expenditures which includes salaries, wages, pensions and interest payments. The example of such situation can be explained in case of Bihar State where the public spending on health per person was Indian rupees (INR) 93 per person in the year 2005-2006 which is far below the standard of set National average of INR 268. It is still difficult for this State to reach to the standard average very soon as in the year 2006 there was a fiscal deficit of 3 per cent of the gross domestic product. Similarly the other poor States also suffer from such issues though a bit better than the Bihar State (Chaudhary, 2006see7,42). Therefore the rural parts of such states are highly affected with such deficiencies in the in finances for health.

Most health spending by the states is for medical care services in the hospitals though some spending is evident for the primary care in the rural areas as well but most of the resources are allocated in the urban health care, the medical college’s administration and family planning activities. Health outcomes specifically the infant mortality respond more to the primary health facilities than to the hospital care. The evidence suggests that he immunisation and preventive care are much helpful to the poor than the hospital based curative care (Deolikar et al, 2007see8,28).

Financing Initiatives with respect to National Rural health Mission

The government of India since the year 2005 has been trying to overcome these challenges of health financing and other risks associated with it. The National Rural Health mission ever since the year 2005 attempts to induce the State governments in joining hands with Centrally sponsored schemes to quickly increase the delivery of quality health care to the people especially of the Rural areas who are poor and in majority ,though the mission has raised the funds and enhanced the efficiency of health delivery. The preliminary data from National rural health mission shows that there have been improvements in the dimensions of rural health delivery and the expenditure by the National health mission to the states contribute the share in per person health spending which now varies between 13 t0 36 per cent share in the health expenditure per person across the States and even to some extent the rich States like Gujarat have capitalised financing by this mission. But all this is restricted and only partially improved (Bajpai et al, 2009see7,48).

Mechanism of Fiscal transfers

The National rural health mission has exerted not only with the amount of funding but also with the mechanics of fiscal transfers for increasing the efficiency of the health care systems in the rural and urban India. The problems of the transfers from centre to the States are well known. The usual process which is seen is that the resources of the central government are lead to the direction for the upgradation of facilities and the priority health programmes for the control of diseases such as Tuberculosis and AIDS leaving the State to backup the recurring costs of prevention, primary health care and generalised health services. In certain situations has often lead to the States accepting the funds from the central government for health infrastructures but ignoring or being unable to allocate funds to step up the recurring expenditures of the new staff and procedures that are in advancement (Ragranjan et al, 2008 see7,51).