Bhavesh Jain, who leads International knowledge linkage programme at ACCESS Health International, and Nehal Jain, Regional Director, Foundation for Research in Health Systems analyse the allocation for health in the current budget and provide some alternatives to finance healthcare.
Despite slowing global economy, Indian economy is growing at an accelerated rate of 7.6 per cent in 2015-16. The Finance Minister, Arun Jaitley in his budget speech, mentioned that healthcare is one of the nine pillars for the development of the country. The budget allocation of Rs 38,892 crores to the health sector for the year 2016-2017 is a welcome move for the country. There has been a 15 per cent increase as compared to last year’s allocation yet it is not enough.
The Indian healthcare system is characterised by low public spending on health and high out-of-pocket payment by the people at the point of availing healthcare services. Individual households contribute about 70 per cent of the total healthcare costs through out-of-pocket payment at the time of illness. It creates financial barriers to access healthcare services and many of those who access services suffer financial catastrophe and impoverishment. On the other hand, the coverage of insurance is very low.
The allocation of Rs 38,892 crores is estimated to be 1.3 per cent of GDP. This rate has been stagnant for the last few years. But, there are several important aspects in the current budget which will reduce out-of-pocket spending and improve protection by providing health insurance coverage.
The budget should also be lauded for some of the indirect measures which will help improve health outcomes. The universal coverage of cooking gas in the country will not only empower women but also reduce the incidence of several illnesses related to cooking fuel. The allocation of Rs 9,000 crores for Swachch Bharat Abhiyan would help in prevention and control of diseases.
Initiatives like the ‘Prime Minister Jan Aushadhi Yojana’ under which 3000 stores are planned to be opened for generic drugs will also help reduce out-of-pocket payment by people in case of illness. Other initiatives like the National Dialysis Service Program with funds through public private partnerships (PPP) will provide dialysis at all district hospitals. This will help an estimated 2.2 lakh renal patients added every year in India avail dialysis services and reduce out-of-pocket expenses.
The Government of India is also clearly taking leaps towards Universal Health Coverage by increasing the revised allocation on health insurance almost five-fold in the year 2016-17. The Rashtriya Swasthya Suraksha Yojana, a National Health Protection Scheme (NHPS), has been announced and plans to cover Rs one lakh per below poverty line family with a top-up of around Rs 30,000 for people above the age of 60 years.
This is more than a three fold increase in coverage from Rs 30000 per family covered under the Rashtriya Swasthya Bima Yojana (RSBY).
One of the aspects that has not been covered in the budget seems to be an investment in primary healthcare services. They are the foundation on which the health sector stands upon. Investing in primary healthcare will improve the population’s health as well as reduce a major share of the burden on the hospitals. It will also help in bringing down hospitalisation expenses. Hence, there is an urgent need to improve quality and access to primary care.
A long-term vision to sustain the developmental agenda for healthcare will help India achieve better results. It can learn from the examples set by other countries. Thailand achieved universal health coverage through its three main insurance programmes including the Universal Coverage Scheme, the Social Security Scheme and the Civil Servant Medical Benefit Scheme. The Universal Coverage Scheme provides coverage for both primary and secondary care to the poor and the underserved. Thailand uses strategic methods for purchasing healthcare services from providers, where the costs of benefit packages are well defined. Also, there is a clear split between the purchaser and the provider of healthcare services. This kind of health insurance system can be beneficial for a country like India as well. If a resource-constrained country like Thailand can achieve Universal Health Coverage, India too has the potential to undertake a bold step. In India, the government plays the role of a purchaser as well as the provider of services. This dual structure increases inefficiencies and the cost of administration. Therefore, the government will need to have a clear vision when it comes to splitting its role as a provider and as a purchaser of services.
In India, 70 per cent of healthcare services are provided by the private sector. So, there is a need for proactive efforts from the government to involve the private sector in its initiatives. GVK Emergency Management Research Institute is a good example of a successful public private partnership (PPP) where investments have been made by the private sector in the form of technology, leadership and systems development. However, PPPs should be adopted with caution and learnings from failed partnership models should be taken into account.
Raising revenue for the health sector
Though there is a need for increasing direct government spending on healthcare, we also need to look at alternative financing mechanisms for health which the government can adopt to raise revenue.
Some of the developing countries have adopted innovative methods for financing the social sector with considerable progress. Earmarking the taxes on products such as tobacco and liquor for healthcare helps in raising revenue for health promotion and services. Earmarked taxes are those whose revenue is designated to be spent on a particular programme or use. They are implemented in the form of sin taxes levied on products which are harmful for health. High-tax measures for tobacco not only raise revenue but are also effective in reducing its consumption in various segments of the population. Article 6 of the WHO Framework Convention on Tobacco Control recognised tax measures and also provides guidelines to implement these measures.
The Australian state of Victoria implemented the world’s first such sin tax that was earmarked for health in 1987. It came in the form of a tobacco control legislation that added a five per cent levy on tobacco products. This revenue was then used to fund a newly formed, independent health promotion foundation called VicHealth. Apart from increasing cigarette prices, the legislation banned most tobacco advertising and formed the basis for later rules to create smoke-free workplaces and public venues.
In Ghana, a 2.5 per cent health insurance levy is added to Value Added Tax (VAT) on goods and services. VAT on goods and services were one of the several sources of financing for the National Health Insurance Fund. 60 per cent of the funds for NHIF comes from VAT. The UK, recently in its budget, announced sugar tax on the soft drink industry. This has been hailed by celebrities and public health campaigners in the UK. Such taxes may not be enough to plug the resource gap, but will surely reduce the burden on the existing resources of the health system. The French Polynesia is another successful example of levying tax on the soft drink industry, both on production as well as import of soft drinks.
Countries like Finland, the Republic of Korea, Portugal, Thailand, Belgium, Egypt, the UK as well as some of the US states of Alaska, Maryland, Massachusetts, Michigan, Oregon and Utah have instituted some marked a part of their tobacco taxes for healthcare. Egypt, for example, earmarks a part of the revenues from tobacco taxes for subsidising health insurance for students, covering preventive, curative and rehabilitative health services.
The Government of India in its budget has increased tax on cigarettes, the excise duty has been raised from 10-15 per cent on tobacco products other than beedis. Pollution cess of one per cent is levied on small petrol, liquefied petroleum gas (LPG) and compressed natural gas (CNG) cars, 2.5 per cent on cars of certain specifications; four per cent on higher-end models. These additional taxes are transferred to general pool and are not earmarked for specific use. These sin taxes should be earmarked separately for the purpose of achieving Universal Health Coverage and should not be transferred to the general pool. Philippines has earmarked excise duty on alcohol and tobacco to fund the reforms for Universal Health Coverage.
Last year in May 2015, employee provident fund had Rs 27000 crores lying unclaimed. The full or partial amount can be invested to generate an interest. This interest amount can then be allocated to primary healthcare reforms. Leveraging these dormant funds can be useful to fund specific healthcare programmes of the government.
Efficient use of available resources
Though it is important to increase public spending on health, it is equally important to utilise the available funds in the most efficient way.
A research conducted by the Centre for Budget and Policy Studies in Karnataka suggests that the public health facilities are not always able to utilise the allocated funds to them and even if some of the health facilities spend the funds, they are not efficently deployed.
Evidence-based approach in healthcare policy making, especially in resource constrained settings, is to be encouraged. In times when healthcare budgets are limited and there is pressure to attain better health outcomes for the population, there is a need to bring in efficiency and important support tools for the decision makers at various levels. In the Indian health system, policy decisions are characterised by lack of evidence. Economic evaluation of healthcare programmes, technology, drugs and equipment would help in deciding cost-effective interventions to bring the overall healthcare costs down. Targeted and cost-effective interventions would help in providing the right mix of healthcare services at every level.
Sharing knowledge across various countries is also one of the important ways in which a country can learn. Initiatives like the Joint Learning Network for Universal Health Coverage has been successful in developing practitioner-to-practitioner learning between countries striving to move towards Universal Health Coverage. A similar platform for knowledge sharing at the national level to develop linkages between the states could be very useful and effective in answering common challenges in health.
Above all, political leadership is an important factor to bring about a major change in the health system. India can learn from the leadership of Prof Dr Recep Akdag, Former Health Minister, Turkey who has been the architect of the Health Transformation Program. His commitment and leadership transformed the health systems of Turkey in a span of just 10 years from 2002-2012, providing Universal Health Coverage at affordable cost. It is a great example that positive change can be brought about in the existing systems to provide high quality health services at lower costs. India can learn from such successful approaches to achieve Universal Health Coverage
This article originally appeared in Express Healthcare, a leading publication in India.