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Health has always been an area for interventions by economists, though, mostly from perspectives that discuss efficiency, information asymmetry, moral hazard and market failure. Only in recent decades, health experts and (health) policy makers have started getting increasingly familiar with these concepts, from which the sub-specialties of health economics and health financing were borne.

In this context, a key landmark has been the release of the 1993 World Development Report titled “Investing on Health”. Thereafter, interest increased and became bi-directional (from health & economic perspectives). Health economics is now a formal subject at many international universities and part of graduate and post graduate courses. Health financing is now an area of interest for many public health experts and policy makers. If an economist starts talking about market failure, moral hazard and (in)efficiencies to a health expert and/or a policy maker, chances are s/he would be able to make some sense of it. Public finance management (PFM) and strategic purchasing has entered into the day to day vocabulary of public (health) policy makers.

The linkage between health and development has been conclusively established, though serious economists and researchers can demand for more local evidence. The exorbitant out of pocket expenditure (OOPE) from the consumption of health services is widely being discussed in India (and in Indian states). There is a common language for both health professionals and economists in India.

In recent years, Indian finance ministers have acknowledged the importance of health and the need for increased budgetaryallocation. In 2015-16, the Government ofIndia spent around 1.18% of Gross Domestic Product (GDP) on health, which is amongst the bottom twenty countries in the world. The National Health Policy 2017 (NHP-2017) proposes to increase government spending on health to 2.5% of GDP. This wouldneed 20-25% increase in union government funding for health; however, in the previoustwo budgets since then, there has been a 13-15% increase only. This amount is balanced off by GDP growth, population growth and inflation rates. Essentially, it has resulted in very minimal increase in nominal terms and clearly not enough to achieve the NHP 2017 proposed target.

An estimated 40-60 million people fallinto poverty due to health-related expenditures in India. The poor become even poorer. As an alternative, they choose to delay the process of seeking health care in a health facility until complications start. This approach is disastrous from the perspective of the economy. Private health expenditures in India are around 70% of the total health expenditure (THE). The out of pocket expenditures (OOPE) are around 60% of THE. Globally, an acceptable limit of OOPE is less than 20% of THE. In terms of OOPEs also, India is amongst the 20 countries with highest OOPEs.

India needs a rapid increase in health allocation. This is needed: (a) for tackling changing epidemiology from infectious diseases to the chronic or non-communicable diseases (injuries and mental illnesses included); (b) for sustaining high rate of economic growth by ensuring ahealthy workforce and (c) because good health is essentiallya ‘social contract’ between people and the government. In most countries, the government spending on health is much higher. Most OECD countries, in spite of their high per capita incomes, spend nearly 8-10% of GDP on healthas opposed toIndia’s1.18%. In terms of health spending as a proportionof government budget, most countries spend around 10% or even higher, but India spends only around 4.5% of its budget on health. Whicheverway we look at it, government spending on health in India needs to be increased. This is needed because India is a signatory to the UN’s Sustainable DevelopmentGoals (SDGs) and the third goal has universal health coverage (UHC) at its centre. The Preston curve states that after reaching a particular level of life expectancy, the amount of investment needed to improve this needs to be increased by 4-fold. India is placed on the inflexion point of the Preston curve.

To be fair, both union and state governments in India need to increase their investment on health. Health services is a state subject as per the Constitution of India. The state governments spend two-thirds of total government spending on health. However, as a proportionof the state budget, most states spend in the range of 4-5% of their budget on health. The NHP 2017 has proposed this to be increased to 8% of state budget by 2020. None of the major Indian states (except Delhi, which has a special status) spend anywhere close to this. Considering it has been twofull years since NHP 2017 was launched in March 2017 and less than 18 months leftto Dec 2020, it is unlikely that this target for Indian states would be achieved unless something major is done.

Health and development are intrinsically linked. Health spending is essentially an investment in human capital formation, which in turn contributes to economic growth & development. In the last two-decades, robust additional evidence to support this linkage has been generated. A healthier andbetter nourished population results in increasedproductivity, reduced worker absenteeism and a greater contribution to economic growth (Renis G, 2000). It has been estimated that every Dollar (or Rupee) invested in health gives 10 times the economic return. (Jamison, 2013; WHO, 2016). Healthier people live longer, and one extra year of life expectancy adds 4% to Gross Domestic Product (GDP) (Bloom et al, 2004). The increased government spending on health helps to reduce poverty (Knoll, 2006; Gomez, 2009). Health sector is a major job creator which further boosts and contributes to economic growth. The health sector contributes to almost 10% of jobs and Gross Domestic Product (GDP) in OECD countries (Ostwald, 2013). Globally, 40 million jobs are expected to be created by 2030 in the health sector (WHO, 2016). Health contributes to women empowerment by providing a larger share of employment to women than in other sectors (Magar, 2016). Not investing in healthcare can lead to disastrous consequences as seen in Sierra Leone, Guinea and Liberia, which are estimated to have lost 12% of their combined GDP due to the Ebola epidemic (World Bank, 2016). Much of this economic and human loss could have been avoided if these countries had adequately invested in healthcare before the crisis to detect and respond to diseases. India is at risk of losing US$ 4.38 trillion (more than double of the total GDP in 2015) by 2030 due to preventable illnesses and premature deaths from non-communicable diseases alone (Bloom, 2014). India can have 18 Lakh new jobs in the healthsector if all that is needed for UHC is done.

Economists are concerned about efficiency. The elaborate network of primary healthcare system in India is under-utilized. It is an issue of both technicalandallocative efficiency. The programs being implemented are for health needs of the past (infectious diseases)-why will people use these facilities if their health needs have changed? The finance ministers are concerned about limited absorption capacity. The fund utilization under National Health Mission (NHM), the flagship program for primary healthcare strengthening in India, remains at around 60-70% as a whole. Some of the states in need of strong PHC system do not similar to those that occurred in Muzaffarpur in June 2019 and Gorakhpur in August 2017. There is a‘Chicken and Egg’ problem because the existing facilities are not delivering enough and governmentsare reluctant to make capital investments for primary healthcare facilities that have a deficiency in the range of 20-40%. Urban areas need an increase in primary health centres, so as to reduce the burdenfrom hospitals.

There is an agreement that more government investment in health is needed. There is an agreement that the PHC system needs to be reformed. It cannot be abandoned because the system is inefficient and not delivering commensurate quality of care. The solution was never throwing the baby in the bath-waterand leaving it to market forces.

Once again it is time for the Union budget. This would be the first budget of the newgovernment. In a so called first, the Union Ministry of Finance had organized consultations to seek inputfrom subject experts and economists for social sector provisions in the upcoming budget (health included). The good part is that in 2019, there is a stronger engagement of officials of MoF and MoHFW- it is arguably stronger than ever. This linkage is happening at a global level. The G-20 presidency under the government of Japan is coordinating a joint meeting of Ministry of FinanceandMoHFW for advancing UHC. India would be holding presidency of G-20 in year 2022. It will be a fitting preparation to that momentous occasion coinciding with 75 years of Independence.

Alongside this, there is a need for looking intoinvestment in health beyond growth in terms of GDP numbers. Investment in health is clearly linked and should also be measured in terms of good health, well-being, improved quality of life -but also for those beyond the ageof 60, increased life expectancy and overall happinessonindividual and societal levels. There are reasons enough to increase government (union & state) spending on health. As the first Union budget of the new government is scheduled in the daysahead, the MoF can lead by example. In addition to everythingalready being done, there are a few things which can be considered by the Union Finance Minister to achieve Vision 2030 for a healthy India.

One, the cost forhealth care services and out of pocket expenditures are major reasons for people falling into poverty. As India intends to eradicate poverty, there is a needto develop a multi-sectoral health-related poverty reduction strategy/plan.China prepared a similar plan in 2015, which contributed to reduced health related poverty by 50% in a shortperiod.

Second, the social determinants of health (SDH) are known to contribute to nearly half of health outcomes. Therefore, interventions focused only on the health sector would not be enough to improve health outcomes. Ayushman Bharat Program (ABP) is a good start with two components of Pradhan Mantri Jan Arogya Yojana (for secondary and tertiary hospitalization) and Health & Wellness Centres (HWCs) for primary healthcare. There is need to add a third arm under Ayushman Bharat Program focused on tackling social determinants of health, with multi-sectoral plansto accelerate the progress of health outcomes.

Third, an estimated 1.8 million jobs can be created by the healthsector in India.It will contribute to advancingUHC and reducingout of pocket expenditures in India. This should be accompanied by suitable reforms in health workforceincluding provision of mid-level healthcare providers (MLHP), task shifting and a dedicated public health cadre with attention on preventive and promotive healthcare.

Fourth,stronger primary health care in urban areas is the need of the hour. A higher level of capital investment is needed for setting up more PHCs in urban India, possiblyone for every 20,000 people. A stronger U-PHC network can make the public health system more efficientby reducing the burden from hospitals and leaving them to provide specialist care. This, along with a governmentmechanism for stronger coordination between state governments and urban local bodies for urban health services, would contribute to strengthening primary healthcare in India.

It is time that economists, health economists, health policy makers, (public) health experts & health program managers sit together (with other stakeholders) and find solutions. New India, after 75 years of Independence in 2022, can become a foundation for a healthy and prosperous India in 2047.




By Dr. Chandrakant Lahariya 

Chandrakant Lahariya is a medical doctor, public health practitioner and public policy strategist. His chance-meeting with a senior political leader contributed to the designing of Mohalla Clinics of Delhi. He has been associated with a number of primary health care reforms in Indian states including Health & Wellness Centres (HWCs) under Ayushman Bharat Program; Family Health Centres (FHCs) of Kerala and Basthi Dawakhana of Telangana. He is a widely known and highly respected experts of vaccines introduction and routine immunization strengthening. At different points of time in last 15 years, Dr Lahariya has advised nearly 29 Indian states and Union territories. He is the youngest fellow ever elected to prestigious Indian Public Health Association (IPHA) and winner of the Government of India and Indian Council of Medical Research (ICMR Award “for translating community-based research in public policy”, for year 2012.

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