GOVERNMENT FINANCING OF HEALTH CARE IN INDIA

SINCE 2005WHAT WAS ACHIEVED, WHAT WAS NOT, AND WHY

OUTLINE

1 Key takeaways

2 Total Government Health Expenditure (TGHE): A flow of funds view

3 TGHE in 29 states: levels, trends, and composition

4 Budget utilization in 29 states

5 PHC in 16 states: levels, trends, composition

6 PHC budget utilization in 16 states

OUTLINE CONTINUED

7 Are central government contributions additional to state spending?

8Deeper Dives: budget utilization in 5 states and what might explain differentials in budget utilization

9 Conclusions

10 Acknowledgements

KEY TAKEAWAYS• Despite favorable economic conditions and an innovative program design in 2005,

India has not come close to achieving its ambitious goals for increasing government spending on health.

• Explanations include: complex funding and federal structure, changing economic conditions, and weak public expenditure processes which new program design was not able to substantially overcome.

• Federal policies to reduce disparities in health spending through redistributive subsidies to poorer states were insufficient to adequately equalize spending. They were further reduced by greater shortfalls in ability to spend in those states.

• Government spending on health and on primary health remains very low –insufficient to finance a substantial package of services.

• There is persistent underspending of health budgets, which is worse in the poorer states. This is caused by problems in governance, public financial management design, and operational constraints. Because poorer states are more dependent on central subsidies, greater underspending of these subsidies affects them more.

• More spending on health is needed, but it must be accompanied by better measures to improve the use of appropriated funds, especially where the need is greatest. The shift to block grants to states will not, in itself, remedy these problems and may make it worse.

RTM FRAMEWORK

Resource Mobilization

What are the determinants of total resource envelope for health at national and sub-national levels?

Resource Allocation

How are funds allocated to different programs and functions at national and sub-national levels? What factors determine the allocation to primary care?

Resource Utilization

Are the allocated funds being utilized? What factors drive successful budget execution? What are the existing bottlenecks?

Resource Productivity

How effectively are resources being translated into services? What are the effects on volume and quality?

Resource Targeting

Are inputs benefiting the intended individuals and population? Is public spending reaching the poor?

Focus of this presentation

GOVT. STATES AMBITIOUS GOALS FOR HEALTH SPENDING“The [National Rural Health] Mission is an articulation of the commitment of the Government to raise public spending on Health from 0.9% of GDP to 2-3% of GDP.”

-NRHM, GoI, 2005

“Health sector expenditure by the Centre and States, will have to be substantially increased by the end of the 12th Plan. It has already increased from 0.94% of GDP in the 10th Plan to 1.04% in the 11th Plan…The percentage for this broader definition of health sector related resources needs to be increased to 2.5% by the end of the 12th Plan.”

-12th Year Plan, GoI, 2012

TOTAL GOVERNMENT HEALTH EXPENDITURE (TGHE) PER CAPITANominal, 2005-06 to 2013-14

-

200

400

600

800

1,000

1,200

1,400

In R

s.

TREND IN TGHE AS % GDPReported by India NHA

0.96%

1.15%

0.00%

0.50%

1.00%

1.50%

2005-06 2013-14

FLOW OF FUNDSUttar Pradesh

DATA SOURCESData Source

Treasury financial Reserve Bank of India – Study of BudgetsState Budget Books – UP & Bihar

Mid-year population Ministry of Statistics and Program Implementation, GoI – yearbook 2013

NHM/SHS Expenditure

NHM MIS, MoHFW, GoI (March 2015)SHS audit reports and FMRs, UP & Bihar

G/N SDP Economic Survey Statistical Appendix (2014-15)

29 STATES – 3 GROUPS OF STATES

Empowered Action Group (EAG) + 1 states – The 8 states designated as EAG states + Assam

North Eastern (NE) states

Non-EAG states

EAG States NE States Non-EAG States

TREND IN TGHE IN 29 STATES

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

In R

s. (m

illio

ns)

EAG+1 States NE States Non-EAG States 29-state (total)

By groups of States, 2005-06 to 2013-14

AVG. NHM AS A SHARE OF TGHE IN 29 STATES

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

EAG+1 States NE States Non-EAG States 29-state (mean)

By groups of States, 2005-06 to 2013-14

NHM AS A SHARE OF TGHE IN 29 STATES2013-14

44%41%40%

37%36%35%

32%30%

26%25%24%23%22%22%22%22%21%21%20%

19%18%17%17%17%16%16%15%13%

6%4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50% EAG States NE States Non-EAG States 29-states (mean)

YEAR-ON-YEAR (REAL) GROWTH RATE IN PER CAPITA TGHE

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

EAG+1 states NE States Non-EAG States 29-state (mean)

By groups of States, 2006-07 to 2013-14

TREND OF TGHE PER CAPITABy groups of States, 2005-06 to 2013-14, nominal and real

0

500

1000

1500

2000

2500

3000

Nominal

EAG+1 States NE States

Non-EAG States 29-state (mean)

0

500

1000

1500

2000

2500

3000

Real

EAG+1 States NE States

Non-EAG States 29-state (mean)

BUDGET UTILIZATION BY SOURCE

GroupsofstatesMean budgetutilization(Treasury)

MeanbudgetUtilization (NHM)

EAG+ 1States 85% 84%

NE States 90% 78%

Non-EAGStates 94% 88%

29-States (mean) 90% 85%

Between 2007-2015

BUDGET EFFECTIVENESS

2.31

2.922.54

2.08

3.21

2.67

0

0.5

1

1.5

2

2.5

3

3.5

EAG States Non-EAG States

NE States

Relia

bilit

y Sc

ore

Trends in Reliability of Health Budgets (Treasury)

8 years avg. score (2005-12)

3 years avg. score (2009-12)

Grade Expenditure outturn

Score

A Between 95% & 105% 4

B Between 90% & 110% 3

C Between 85% & 115% 2

DPerformance is less than required for a C

1

Treasury budget credibility scoring chart and results, between 2005-12

PRIMARY HEALTH CARE FINANCING – 16 STATES2008-2014

METHODS TO ESTIMATE PRIMARY CARE ALLOCATION

TGHE Estimated GPHCE Estimated

1. State Health Society (NHM) 1. State Health Society (NHM)

2. State Treasury (Health) 2.1 Medical and public health (identified primary care lines based on the NHSRC Budget Tracking Toolkit)

2.2 Family welfare (all sub budget codes included)

Streams of funding Specific components included to estimate health care expenditure

1. State Health Society (NHM)

1.1 Central releases

1.2 State releases

1.3 Accounts balance carried over

2. State Treasury (Health)

2.1 Medical and public health – Revenue and capital (2210 and 4210)

2.2 Family welfare – Revenue and capital (2211 and 4211)

2.3 Central transfers under infrastructure and maintenance (sub-set of 2.1)

Other relevant variables

General State Government Expenditure (GSGE) – all departments

Gross state domestic product

Annual mid-Year population

Source: NHSRC Manual

16 STATES – EAG AND NON-EAG7 Empowered Action Group (EAG) states – The 7 states designated as EAG states, including: Rajasthan, Madhya Pradesh, Uttar Pradesh (UP), Bihar, Odisha, Chattisgarh, Jharkhand

9 Non-EAG states – Including: Punjab, Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, West Bengal, Assam

EAG States Non-EAG States

Trend of GPHCE per capita

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14Bihar 111 150 132 176 179 204 222UttarPradesh 175 218 235 235 286 274EAG 93 194 213 247 247 313 365Non-EAG 136 179 220 260 260 355 363AllStates 116 183 218 254 254 334 364

0

50

100

150

200

250

300

350

400

InNom

inalRs

TrendofGPHCEpercapita

ThedifferencebetweenBihar,UPandnonEAGpercapitaGPHCEiswideningovertime(7timesmore)

COMPARISON OF 6 YEAR AVG. GPHCE PER CAPITABetween EAG and non-EAG states

No significant difference between EAG (Rs 241) and non-EAG (Rs 265) average per capita GPHCE

241.13

0

50

100

150

200

250

300

350

400

450

500

State AVG EAG AVG

265.01

0

50

100

150

200

250

300

350

400

450

500

State AVG Non-EAG AVG

Growth in TGHE and GPHCE between 2005-06 and 2013-14

213% 201%

264%

231% 222%

251%

294%

220%

Bihar UP EAG+1 NonEAG

GrowthinTGHE GrowthinGPHCE

TGHE grew slightly more rapidly than GPHCE in non-EAG states but GPHCE grew more rapidly in EAG states. However, since non-EAG states start at higher level, we could expect to see increasing disparities in TGHE but decreasing (small) disparities in GPHCE.

GPHCE PER CAPITA

578544

514480

431378 360 347 328 312

278 276 274 272236 222

0

100

200

300

400

500

600

700

In R

s.Nominal, 2013-2014

EAG Non-EAG

NHM EXPENDITURE PER CAPITAEAG Non-EAG

2014-2015

284

243 230 226

179

141 114

327

289

161 157 145 142 140 130 104

-

50

100

150

200

250

300

350

In R

s.

AVERAGE UTILIZATION OF NHM BUDGETBetween 2007-2015

EAG+ 1 state Non-EAG

110%105%

94% 93% 91% 91% 90% 87% 84% 83% 81% 81% 77% 77% 73%

51%

Centralgovt.funding– stimulantorsubstitutioneffect?

WeusedamodelthatcapturedthelevelofcentralallocationtoprimaryhealthcareinIndianRupeesinstatei attimet,andmeasureditsimpactonstate’sowncontributiontospendingonprimaryhealthinstateattimet,accordingto:

stateownit=α+β1centralit+β2GSDPit+β3priorityit+β4revit+fi+dt+εit

Wherecentralit wasthecentrallevelallocationstotheeachstateforprimaryhealthcare,stateownitwasstate’sowncontributiontoprimaryhealthcare,GSDPitrepresentedthepercapitaGDPineachstateattimet,priorityit representedtheratiobetweenstatehealthspendingandtotalstatehealthexpenditures,andrevit representedeachstate’sowntaxrevenue,werestatefixedeffects,werenationwidetimedummies,andεit wasanerrorterm.

Centralgovt.funding– stimulantorsubstitutioneffect?…contd.

! Log$of$State’s$Own$Primary$Health$Spending$per$capita,$(2005$Rs)!

Log$Central$Allocations$Primary$Health$Spending$per$capita$

C0.292$(0.133)**$

GSDP$per$capita$ 0.0001$(0.0001)$Ratio$State$Health$Spending$on$

PHC/Total$State$Health$Spending$

2.497$(0.638)***$

State$Revenue$per$Capita$ 0.0001$(0.0001)$Constant$ 3.306$(0.336)***$

N$ 142$

States$ $$16$R2$ 0.70$

* p<0.1; ** p<0.05; *** p<0.01, cluster robust standard errors in parentheses

Centralgovt.funding– stimulantorsubstitutioneffect?…contd.

! Log$State’s$Own$Primary$Health$Spending$per$capita,$

(2005$Rs)$EAG=1$(poor)!

Log$State’s$Own$Primary$Health$Spending$per$capita,$

(2005$Rs)$EAG=0$(rich)$

Log$Central$Allocations$Primary$Health$Spending$per$capita$

F0.175$(0.240)$ F0.435$(0.086)***$

GSDP$per$capita$ 0.0001$(0.0001)$ 0.0001$(0.0001)$Ratio$State$Health$Spending$on$PHC/Total$State$Health$Spending$

2.224$(0.892)**$ 3.446$(1.016)**$

State$Revenue$per$Capita$ 0.0001$(0.0001)$ 0.0001$(0.0001)*$Constant$ 2.538$(0.540)***$ 3.417$(0.327)***$N$ 72$ 70$States$ $$8$ 8$R2$ 0.62$ 0.85$* p<0.1; ** p<0.05; *** p<0.01, cluster robust standard errors in parentheses

BUDGET UTILIZATIONDEEPER DIVE IN BIHAR AND UP

&

WHAT’S WORKING IN 3 BETTER OFF STATES?

UTILIZATION RATE FOR NHM BUDGETS AND AVAILABLE FUNDS

Bihar 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Utilization against approved budget 112% 62% 111% 82% 67% 76%

Utilization against available funds 64% 45% 69% 49% 41% 50%

UP 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Utilization against approved budget 81% 76% 95% 77% 77% 84% 98%

Utilization against available funds 61% 67% 78% 60% 78% 47% 61%

Interaction of PFM systems, operational processes and governance structures

Upstream – Effect of timing and Downstream – local community level constrained by low capacity

IMPACT OF LOW UTILIZATION OF NHM FUNDS ON THE TGHE

1,19,650

34,036

1,50,370

50,595

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

UP 2014-15 Bihar 2013-14

In R

s. (m

illio

ns)

Current TGHE TGHE if SHS spent 100%

UP and Bihar

Scope

Methods

Time

Sample

2012-13to2014-15

- PEFA2016Framework- Budget,expenditureanalysis- Qualitativeinterviews

Understandingreasonsforbetterutilizationoffunds

Treasury&NHM

Ernakulum&Kozhikode:KeralaPune&Nagpur:Maharashtra

SriGanganagr&Tonk:Rajasthan

APPROACH FOR THE DEEP DIVE

Consistentlyhighutilizationrates(underthetreasury&NHMroutes)

Rajasthan

- Aggregateexpenditureoutturn

- Auditcoverage- Timeliness- Actiontakenonauditreports

- Predictabilityofin-yearresourceallocation- Procurement- Payrollcontrol- Internalcontrolonnon-salaryexpenditure

Indicatornotused

- Budgetclassification- Allocatingtransfers- Timelinessoftransfers- Performanceevaluation

- Mediumtermexp.estimate- Mediumtermexp.ceiling- Alignmentofplan&budget- Budgetpreparationprocess

- Financialdataintegrity- Financialreports

AdaptedthePEFA2016Framework(PublicExpenditureandFinancialAccountabilityFramework,2016)

FRAMEWORK FOR THE DEEP DIVE

PerformanceofKerala,MaharashtraandRajasthan

Budgetexecution

Whatpolicyfactorsenablebetterbudgetexecution?

Policyfactors

Whatoperational/processfactorsfacilitatebetterexecution?

Operational/processfactors

Whatleadershiptraitsorgovernancefactorsenablebetterexecution?

Leadership&governancefactors

Specificallywhattypeofcapacitiesarebetterandatwhatlevelsthatfacilitatebetterexecution?

Humancapacityfactors

KEY QUESTIONS FOR THE DEEP DIVE

- Kerala,MaharashtraandRajasthanutilizeNHMbudgetinitsentirety.

NHM utilization

67%

110%94%

75% 77%76%

113%

98%

82% 84%

106%

77%91%

98%

Bihar Kerala Maharashtra Rajasthan UttarPradesh

AgainstapprovedNHMbudget

2012-13 2013-14 2014-15

BUDGET EXECUTION

- BiharandUPsufferfromarangeofissuesthataffectbudgetutilization– primarilyattheStateHealthSocieties

NHM utilization

41%

97% 99%106%

78%

50%

143%

95%87%

47%

99% 98% 95%

61%

Bihar Kerala Maharashtra Rajasthan UttarPradesh

AgainsttotalavailableNHMfunds(includingopeningbalance&interestearned)

2012-13 2013-14 2014-15

BUDGET EXECUTION

Factorsthatfacilitatehighbudgetutilizationin3states– thesefactorsdonotexplaincausality,butassociation.

Noonesinglefactororpracticeexplainsincreasedutilizationoffundsinthehealthsector.Rather,rangeofsmallercomplementaryactionsinpro-performanceenvironment.

1. Strongleadershipatalllevels

2. Strategicvisiontranslatedintopolicyframework–– KeralaHealthPolicy,Maharashtra,etc.

3. Littlepoliticalinterference.

4. Longertenuresofkeyofficers

5. ClosecoordinationbetweenDOF,DOH,NHM,LSG– planning,budgeting,executionandmonitoring– Realisticandtimelyplanning

OVERALL OBSERVATIONS

6. Strongmentoringsupportateachlevel

7. Extensiveuseoftechnology– thatfacilitateshighlevelsoftransparencyandaccountability– Rajasthan:ASHASoft,mobileappforrecordingon-siteinspectiondata– Maharashtra:BEAMS(budgetallocation&monitoring),HRmanagement,etc.

8. Closemonitoring/qualityofsupervisionallowsformid-coursecorrection– Maharashtra:Capitalprojectsmanagement&monitoring;DeputyDirectoratthe

Circlelevel;GuardianMinister– Kerala:StandingCommitteesforHealthinPanchayats

9. Highanalyticalcapacity– dataandinnovationcultureissupported

10. Trulydevolvedgovernancestructures– financialanddecisionmakingauthority– Kerala:DistrictProgramManagersarefromGovernmenthealthsystem– haveall

powers&authority– Rajasthan:BlockCMOsince2008withadministrativeandfinancialauthority

OVERALL OBSERVATIONS

CONCLUSIONSØ India has not achieved its ambitions to increase government

spending on health. Despite significant increases, government funding remains insufficient to finance a basic package of health care in many states

Ø Substantial disparities in government spending persist across states despite a significant central government effort at redistribution

Ø A significant share of budgeted funds remain underutilized, with worse utilization for the more innovative funding channels which disproportionately affect the poorest states

Ø Governance, public financial management design, and operation problems all combine to undermine better program performance

Ø More money for health is needed, but this must be accompanied by new approaches to improve expenditure effectiveness

Ø It is unlikely that devolution of spending authority to the states alone will remedy these problems especially in the poorer states.

SOME THOUGHTS ON WHAT TO DOØ States need to decide to give priority to health and balance demands for

population health improvement and financial risk protection. Central grants can help, but this is basically a political problem that needs advocacy and policy support.

Ø Improving public expenditure performance in worse performing states needs strategies that address three elements:

Ø Separating funding from provision and introduction of a purchasing model is one strategy to remedy weaknesses in government delivery. E.g. district-level purchasing fund.

Ø State governments have used varied approaches to this in insurance.Ø Unclear if this can address constraints in weaker states – needs careful

design and testing

PFMDesign

OperationalcapacitiesGovernance