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Indian Journal of Community Medicine

Budget 2005-06 – Whither Public Health Agenda

Author(s): Editorial Staff

Vol. 30, No. 2 (2005-04 - 2005-06)

Public health budgets in a scenario of a neglected and declining public health system become key instruments for public health advocates. There is a growing interest in discussion and analysis of health budgets and health expenditures for two reasons. Firstly, the economic reforms of the nineties have created a trajectory of public health spending that shows a downward trend both in terms of share of the Government’s budget as well as a proportion of the Gross Domestic Product. Prior to economic reforms in 1986 public health expenditures accounted for 1.2% of the GDP and were over 3.5% of government’s budget. By 2001 these figures read a dismal 0.9% and 2.7%, respectively. What was worse was the decline in new investments by the Ministries of health as reflected in the decline in capital expenditures from a robust 10% in 1986 to a mere 4% in 2001. Secondly, the use of the public health system during the decade of 1986 and 1996, for which national data is available via the 42 nd and 52 nd Rounds of the National Sample Survey, shows a shocking decline of over 30% in proportion of patients seeking care in public health institutions.

The two reasons are closely linked.The declining investment and expenditures in the public health domain have created a scenario where people, especially the poor, have moved away from the public health system because the latter cannot meet their needs and they often have had to face denial of healthcare in public health institutions. Further, since 1998 with user fees being charged in many states under the so called health reform policies dictated by World Bank and allied agencies, the access to public health care for a vast majority of the poor became even more difficult.The NSS data also indicates that between the two Rounds the rate of non-utilisation for seeking health care for illness increased by one-fifth and for nearly half the hospitalizations patients had to either obtain loans or sell assets to seek healthcare.

Trends in Public Health Spending

The table below shows a historical trend of public and private health expenditures in India and this reveals that post World Bank led economic reforms (1991 onwards) have set in a trend where the private health sector has taken control of the health sector in India at the cost of the public health sector. Budgets since 1991 have set in a linear downward trend and this has drastically impacted the public health system, has affected adversely the vast majority of the poor who are the main users of the public health system and have forced them to migrate to the private health sector which often pushes them into the vicious trap of indebtedness. At the other end of the spectrum the private health market is booming and India is becoming a major international centre for what is disgustingly referred to as medical tourism.

The total value of the health sector in India today is over Rs.1,500 billion or US$ 34 billion. This works out to about Rs.1,500 per capita which is 6 percent of GDP. Of this 15 percent is publicly financed, 4 percent is from social insurance, 1 percent private insurance and the remaining 80 percent being out of personal resources as user-fees (85 percent of which goes to the private sector). Two thirds of the users are purely out-of-pocket users and 70 percent of them are from the poorest sections. The tragedy is that in India, as elsewhere, those who have the capacity to buy healthcare from the market most often get healthcare without having to pay for it directly (like employees of the government or most employees of the organized sector), and those who are below the poverty line or living at subsistence levels are forced to make direct payments (daily wage earners, peasants and agricultural labourers, petty vendors etc.), often with a heavy burden of debt, to access healthcare from the market.

Budget 2005-2006

When the new government came to power early last year a new hope emerged because the manifestoes of both the Congress and the CPM talked about increasing public health investments and this even got reflected in the Common Minimum Program of the UPA coalition.

Growth of Private Health Expenditures in India in Comparison to Public Expenditures 1951-2003

    1951 1961 1971 1981 1986 1991 1995 1996 1997 1998 2000 2003
(Rs. Billion)
Public 0.22 1.08 3.35 12.86 29.66 50.78 82.17 101.65 113.13 126.27 178.00 219.59
Private 3.65 10.99 52.84 90.54 146.98 278.59 239.23 373.41 459.00 835.17 1250.0  
Health Expenditure as percent of GDP Public 0.25 0.71 0.84 1.05 1.19 0.92 0.95 0.91 0.88 0.81 0.87 1.00
Private 2.25 2.60 4.06 3.61 2.88 3.04 3.07 3.00 3.30 4.76 5.60  
Ratio (Time)
- 3.4 3.3 4.1 3.1 2.9 3.4 3.3 3.3 3.6 4.7 5.7  

Source: Public Expenditures from Finance Accounts of state and central governments, and private expenditures from National Accounts Statistics of CSO.

In recent months the political economy of healthcare has witnessed a churning with the hope of bringing about some significant changes. The Common Minimum Program of the UPA coalition at the Centre had envisaged raising public health expenditure in the next few years to between 2 – 3% of GDP from the current 0.9% with a strengthened focus on primary health care. The first budget of the UPA government failed to address this issue. In the meanwhile the Jan Swasthya Abhiyan with the support of the National Human Rights Commission brought into focus the issue of healthcare as a right and highlighted the denial of healthcare within the public health system through public hearings conducted across the length and breadth of the country between June and December 2004.

While this exercise was happening and states were being exposed for their failure to deliver basic healthcare to the people of the country, the Central government came up with the idea of a National Rural Health Mission to address the primary healthcare needs of the rural masses. The National Advisory Council under the leadership of Sonia Gandhi made this a priority issue and pushed the government to expedite the commitments made in the CMP. A number of consultations were held where experts from across the country deliberated the strategies for making this mission a success. The key elements of the discussion focused on comprehensive primary healthcare, village/hamlet level health worker christened as ASHA (Accredited Social Health Activist) and decentralization via panchayats. As yet the process is still evolving and various task groups have been set up to come up with strategies and suggestions for various dimensions of the Mission proposals.

There was great expectation that the Budget 2005-06 will make a marked deviation using the NRHM as the peg for atleast launching a process for changing the political economy of healthcare in India. Unfortunately the only mention of the NRHM is in the Finance Minister’s speech, “The National Rural Health Mission (NRHM) will be launched in the next fiscal. Its focus will be strengthening primary health care through grass root level public health interventions based on community ownership. The total allocation for the Department of Health and the Department of Family Welfare will increase from Rs.8,420 crore in the current year to Rs.10,280 crore in the next year. The increase will finance the NRHM and its components like training of health volunteers, providing more medicines and strengthening the primary and community health centre system."; When we look at the expenditure budgets and demand for grants of Budget 2005-06 we find that there is no mention of NRHM as an item of expenditure.

The Finance Minister says that the increase (Rs. 1860 crores) over the previous budget will finance the NRHM component. This overall increase of 24% in the budget appears substantial and if it were to be divided equally among all PHCs then each PHC would get additionally about Rs. 8 lakhs. However the budgetary allocations belie this fact when we see that the increase for the HIV/AIDS program is 105% from Rs. 232 crores in 2004-05 to Rs. 476.5 crores in 2005­ 6. Similarly for the RCH program the increase is a whopping 94% from Rs. 710.51 crores to Rs. 1380.68 crores, for medical education also a high of 50% from Rs. 912.82 crores to Rs. 1360.78 crores and as much as 80% for Indian Systems of Medicine and Homoeopathy (AYUSH) from Rs. 225.73 crores to Rs. 405.98 crores. Just these four programs account for Rs. 1543 crores (or 83%) of the increased amount of Rs. 1860 crores. Thus the FMs statement in the budget speech is clearly a populist pronouncement and like all such pronouncements of past budgets similar to the various versions of health insurance packages of different finance ministers, sickness assistance funds etc.. is pure gas and will disappear as soon as the budget euphoria dies down. So, will NRHM meet the same fate? We have to wait and watch. The overall budget of the Ministry of Health and Family Welfare is outlined below:

Demand for Grants of Ministry of Health and Family Welfare (Rs. Crores)

Category Budget 2004-05 Budget 2005-06
Medical and Public Health 3103.12 4253.84
AYUSH 225.73 405.98
Family Welfare 6696.37 7769.01
Gross Total Health 10025.22 12428.83
Grants to States and UTs 4663.00 5158.00
Total Health Central govt. 5362.22 7270.83
Less recoveries (-)1587.10 (-)1741.72
Net Health Central govt. 3775.12 5529.11

Source: Budget 2005-06, Demand for Grants, Demand Nos. 47, 48, 49,
Ministry of Finance, GOI, New Delhi, 2005

While the FM has failed to deliver healthcare in the budget, we cannot write him off. We have to commend his efforts at doubling the allocation for the ICDS and the Mid-Day Meal programs. Each of these gets over Rs. 3000 crores in comparison to half that amount a year ago. With growing evidence of malnutrition in the country this is certainly a welcome step and will atleast contribute to the health of the children to whom this benefit reaches.

Another commendable step which the FM has taken is a special effort at raising resources for the health sector by charging a 10% levy on health degrading products like cigarettes, gutka, chewing tobacco, snuff and and paan masalas. These resources the FM has promised will be added to the NRHM kitty. Further the FM continues to experiment with tax reforms. Last year he had introduced a transaction tax in the stock markets and this year one expected a broad basing of such taxation to cover all financial transactions and earmarking this for the social sector. He has added only cash withdrawals of Rs. 10,000 and more to be covered by this tax of 0.1 %. If the government is genuinely concerned with elimination of poverty as the FM mentions in his budget speech ("The whole purpose of democratic government is to eliminate poverty and give to every citizen the opportunity to be educated, to learn a skill and to be gainfully employed. The Government holds that it is its sacred duty to empower the poor and eliminate the scourge of poverty";) then it has to take these measures to enhance tax collections and raise our tax:gdp ratio from a measly 10% to over 20% as one finds in all countries which have well developed social security provisions for their citizens.

Ravi Duggal
CEHAT, Mumbai

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