Protect and expand India’s public healthcare system: The inequality imperative

Protect and expand India’s public healthcare system: The inequality imperative

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India lost Rs 32 lakh crore in illicit outflows in 10yrs. This money can be used to improve public services. Read more. http://bit.ly/1RoL9a7

@OxfamIndia recommends four crucial points to improve the country’s health systems. Know more. http://bit.ly/1RoL9a7

According to estimates by the International Monetary Fund (IMF) developing countries lose Rs 14 lakh crore (at current exchange rates) a year to tax cheating. Recent research covering 1500 MNCs in India showed that those with links to tax havens reported 1.5 % less profit. 

This money could fund free quality public services, vital to fight poverty and inequality by putting virtual money in peoples’ pockets, as Oxfam research has shown- they do the opposite of what user charges do. With the final round of UN Financing for Development negotiations ongoing, these are crucial times to make our tax systems more equitable and efficient – for stronger public services, including healthcare.  

Results of cross-national modelling in 89 low-income and middle-income countries show that each Rs.10 per-capita increase in tax revenue resulted in an additional Rs 1 of public health spending per capita while a Rs.10 increase in GDP per capita resulted in an increase of Rs.0.10. 

Out of pocket (OOP) expenditures push an estimated 60 million Indians (six crore) into poverty every year. User charges still remain in the public healthcare delivery system. The overall public spending hovers at about 1% of GDP. Yet, increased health spending in rural India over the last decade is slowly yielding results. 

Unfortunately, there are budget cuts and insurance-based initiatives towards Universal Health Coverage (UHC) being proposed that seem extremely worrying.  A recent paper brought out by Oxfam India explores available evidence around financing healthcare for all in India and offers recommendations.

During 1986-87, about 60% of the hospitalised cases were treated by the government institutions across urban and rural areas. In 2004, it fell to about 40%, reflecting the poor public spending on health1 . However, the following decade saw focused attention on rural care, and most deliveries across urban and rural areas are now taking place in government hospitals as the following chart shows. 

In a decade which saw government schemes across the country that offered incentives to deliveries in private sector facilities, this is a remarkable result. 

Utilisation figures from the eighties are often quoted to argue that the poor prefer the private sector now.  It however ignores the fact that this was a period when the public sector was systematically starved of resources and market principles were introduced into the system. Forgone care due to financial reasons doubled between 1986-87 and 2004, from 15%  in rural and 10%  in urban areas  to 28% and 20% respectively. 

Sharp Spending Cuts in India’s Latest Budget

The spending cuts by the centre- despite being accompanied by higher revenue share to states - are deeply concerning. The employment guarantee scheme saw a reduction of 3% in real terms.  Allocations to the child nutrition scheme  were cut by half. Total allocations for health was cut by about Rs. 6000 crore.  

Budget for government’s mid-day meal scheme  in schools was cut by 41%. The central government argues that cuts will be compensated by a larger allocation to states. The share of taxes to states has indeed increased in an encouraging step of fiscal devolution. However, researchers point out that poorer states who rely more on central support face net losses.

At the same time, the latest report from Global Financial Integrity found that developing countries lost Rs 422 lakh crore (at current exchange rates) in illicit financial flows in the last decade.  India was among the top five countries in the world with almost Rs 32 lakh crore (at current exchange rates)  in illicit outflows.  Just to compare, India’s annual central outlay on health and rural housing put together is Rs 34,575 crore.

India’s tax to GDP ratio is among the lowest of all G20 countries, just above Mexico and Indonesia, and far below other BRICS (Brazil, Russia, India, China and South Africa) countries. In addition, national aggregate amount of revenue foregone due to exemptions by the central government is estimated to be 43.2 % of total tax revenue for the year 2014-15, at Rs 5.89 lakh crore.

This shows that there indeed are alternative sources that can be tapped in order to generate more resources for health. Moreover, the bigger question seems to be how these new alternative funds will be spent— will it be through an expansion of the public sector, or through an insurance-based, private sector dependant platform?

The situation seems grim: it is puzzling that policy advice that although flies in the face of evidence still carries weight within the government. Prof Arvind Panagariya, the Vice Chairperson of Niti Aayog –a  think tank which just replaced  India’s Planning Commission- suggests the following in a recent book:

Turning to medical service delivery, we recommend that rather than further expand the provision of free primary, secondary, and tertiary health care services in the public sector, the government must focus on providing financial resources to the poor for routine and non-routine care... Even so, if the government must insist on the provision of the services, it must do so on the full cost recovery basis.

It is highly disappointing that India’s policy elite refuses to learn from India’s own or the global  experience about the disastrous effects of user charges on peoples’ lives.  Echoing the Vice Chairperson’s viewpoint, Niti Aayog’s latest Working Paper on financing healthcare veers dangerously towards insurance-based solutions, Corporate Social Responsibility, and PPPs. 

Thankfully, despite the clear focus on insurance based, demand-side financing measures incentivising access to private providers, rural public health infrastructure has been silently improving in the last decade, with remarkably positive results. 

It is important to keep the momentum going, rather than allow the inadequate model of Rashtriya Swasthya Bima Yojana (RSBY) to become the foundation for India’s progress towards UHC. Oxfam India’s paper makes the following recommendations for the country’s health system:

• Government should be the primary provider of healthcare, and provision of healthcare for all should not be based on expansion of health insurance-based models focusing on hospitalisation. 
• A clear roadmap to enhance budgetary spending on healthcare to 3%-5% of GDP should be drawn. Public tax-based funding and contribution from the organised sector should finance healthcare and focused funding in the form of specific central transfers should be made to promote equitable access. 
• Regulation of the private sector must be a priority. Establishment of standard treatment protocols and empowerment of communities to hold the healthcare system accountable will be critical to ensure quality of healthcare in the public and private sectors. 
• A comprehensive review of Rashtriya Swasthya Bima Yojana (RSBY) and other currently fragmented government funded healthcare schemes like Central Government Health Scheme (CGHS) should be conducted with the aim of future consolidation for a national programme ensuring healthcare for all.

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1Still, 60% of all people from the bottom 20% were getting hospitalised in the public sector in 2004.  

Written by: Oommen C. Kurian, Research Coordinator, Oxfam India

Photo credit: Srikant Kolari