Health financing


The total expenditure incurred on health, which includes public, private and out of pocket expenses was 4.1% of GDP in 2008-09. This is comparable with other developing countries in similar per capita income. owever, public sector contributed to just 27% of this, which is highly inadequate. Public sector expenditure which includes expenditure by centre and states was just 0.93% of GDP in 2007-08 and increased marginally to 1.04% in 2011-12. Overall public sector funding for health during the 11th Plan was 1.97% of GDP when broader determinants of health like water supply, sanitation, ICDS and Mid-day meal are considered together with core health (expenditure by Ministry of Health and Family Welfare and by Ministry of labour on Rashtriya Swasthya Bima Yojana).

Aim of 12th Plan: Out-of-pocket expenditure on health care is a burden on poor families leads to impoverishment and is a regressive system of financing. Increase in public health spending to 1.87 per cent of GDP by the end of the 12th Plan, cost-free access to essential medicines in public facilities and proposed regulatory measures are likely to reduce out-of-pocket spending as a proportion of private spending on health.

Eleventh Plan government expenditure in health was Rs 89,576 crores. It is projected to increase to Rs 3,00,018 crores, which is 3.35 times that of eleventh Plan. Maximum increase is in allocation to AIDS control and Department of Health Research. Total expenditure, both plan and non-plan by centre and states covering broader health ( health, water supply and sanitation) is proposed to be 2.5% of GDP.

Incentivisation of States: Transfer of more funds from centre to the states is to be made conditional upon a higher expenditure by the states on health. The incentive grant could be as an instrument of equity between states, where both performance and need is operated recognised in making allocative decisions.

Flexibility: Flexibility in central funding for states may be built in so that states take the lead in devising plans suited to their health needs. The proposal for a flexi fund to the states is being recommended for all Centrally Sponsored Schemes in the 12th Plan. Accordingly, in the health sector, within the broad national parameters, states would have the flexibility to plan and implement their own Health Action Plans.

Innovative Payment Methods to Improve Outcomes: To enhance efficiency of public sector different payment methods may be tried, e.g. to provide bonus to managers and health personnel for achieving higher coverage or achieving measurable health outcomes in their respective areas.

Other Models of Financing
Public-Private Partnerships (PPP): PPPS offer an opportunity to tap the material, human and managerial resources of the private sector for public good. Gaining experience from past where PPP models have not been successful due to inadequate capacity of the government to negotiate and manage, it has been suggested that instead of going in for ad hoc PPPS, to persue well negotiated and managed contracts that are regulated effectively.

To encourage private sector to set up hospitals and medical colleges in non-metropolitan cities, where projects may not be remunerative, it has been suggested that government may provide financial assistance to them upto 20% of the project cost.

An additional model for consideration is the Not-for-profit Public Private Partnership (NPPP). PPP arrangements should address issues of compliance with regulatory requirements observance of Standard Treatment Guidelines and delivery of affordable care.

Resource generation by facilities and Colleges: Under the recently drafted Companies Bill, the Government has proposed that companies should earmark 2 per cent of their profits for Corporate Social Responsibility (CSR) activities. CSR is mandatory for Central Public Sector Enterprises. As there is huge gap between need and availability of tertiary care facilities, public facilities may part finance their their recurring expenditure by mobilising contributions under CSR. Adequate safeguards have to be built in so as to ensure that donations are not used to influence the policies or practices of healthcare facilities in any way. 
All medical colleges should be encouraged to develop their own corpus to attain financial flexibility over period of time.

Cross Subsidisation: Another option that may be tried is cross subsidisation of services.


Please enter your comment!
Please enter your name here