Health Budget 2006-07: New Directions?

Ravi Duggal

There is a growing interest in discussion and analysis of health budgets and health expenditures for two reasons. Firstly, the economic reforms of the 90s 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 the mid-80s, public health expenditures had peaked 1.6 per cent of the GDP and was 3.95 per cent of government's budget. By 2001, these figures read a dismal 0.9 per cent and 2.7 per cent, respectively, and further down to 0.8 and 2.4 per cent in 2005. What was worse was the decline in new investments by the Ministry of Health as reflected in the decline in capital expenditures from a robust 12 per cent in 1986-87 to a mere four per cent in 2000-01 and only a slight improvement in 2004-05 at five per cent.

Secondly, the use of the public health system during the decade of 1987 and 1996, for which national data is available via the 42nd and 52nd Rounds of the National Sample Survey (NSS) of the Government of India, shows a shocking decline of over 30 per cent in proportion of patients seeking care in public health institutions.

This decline in use of public health facilities was precipitated by the neglect and subsequent collapse of the public health system due to its under-financing in the 90s. Recognising this neglect, the new UPA government in its Common Minimum Programme (CMP) promised to remedy the situation with much larger investments in health and a beginning has been made via the National Rural Health Mission (NRHM).

Budget 2006-07

The 2006-07 Budget was indeed the most eagerly awaited budget in recent years for at least two reasons. First, further tax reforms were expected, but nothing happened. And UPA flagship scheme- the NRHM was to get a boost, and this has partly happened. This reminds one of the Minimum Needs Programme (MNP) of the early 80s (sixth plan), when Indira Gandhi returned to power. The MNP had effectively reached out to rural India and laid the foundation for its mainstreaming into the national economy. The CMP's flagship programmes are MNP Part 2, which is helping rural India make the next transition to integrate with the globalising Indian economy.

A quick review of the 2006-07 budget in contrast with recent years reveals a changed trajectory of emphasis in the latest budget, with much larger allocations for rural sectors like agriculture and rural development, and social sectors like health, education, women and child development where the thrust is also on rural areas via the flagship programs. While one sees large increases for the social sectors (30 to 50 per cent per annum), this certainly does not mean enough is being allocated to these sectors. Defense and interest payments together account for half the Union Budget (6 per cent of GDP) and this is a matter of concern because it exposes the inadequate capacity of the government to raise resources. In fact, health and education together must constitute nine per cent of the GDP (including state government spending) as per commitment in the CMP of the UPA government. So we are still a long way from realising this goal and the government has to work much harder at raising additional resources.

The CMP commitment to health has been stated as three per cent of GDP to be reached before the current UPA government's term ends. Thus by 2008-09, assuming the current growth rate, the GDP at current prices is likely to be Rs 52,000 billion and three per cent of this would be a whopping Rs 1500 billion, which is nearly five times of what the state and central governments spend presently on health.

Health, like most social sectors, is a state subject and the contribution of the state governments to health spending is between 80 and 85 per cent. While in the recent years the Union government has substantially hiked its contribution to the health budget increasing at 30 per cent per annum, in itself this makes a very small impact on the overall health budget. Presently, the health budget of state and central government combined is less than one percent of GDP (Table 1). To reach three per cent of GDP, both the Central and state governments have to more than triple their budgets. As things stand today, the Central government has shown that its capacity is limited to increasing their contribution by about one-third each year and the state government's capacity seems to be restricted to annual increase of about one-sixth. With such a progress in health budgets the targeted increase to three per cent of GDP will never be realised. Tables 1 and 2 (on page 15) indicate recent trends in public health spending. Table 1 reveals that Central government's own expenditure is increasing rapidly whereas its grants to states have shrunk, and that the state government health spending is stagnating and as a consequence the overall public health expenditure remains below one per cent of GDP.

Table 2 looks at some of the key programmatic allocations in the Union Health Budget. Here we see that traditional sectors like hospitals, medical education and family planning services are now receiving a smaller chunk of the health budget in comparison to the “new” sectors like RCH, HIV/AIDS, immunisation (especially pulse polio). From the 2005-06 budget onwards, NRHM has hijacked the RCH and Family Planning budgets giving a boost to rural health allocations.

But the question here is will the enhanced rural health budgets via NRHM address the demand side issues of rural health provision which is primarily access to reasonable medical care? The NRHM document and the NRHM- related heads in the 2006-07 budget do not provide any evidence for that. The budget allocations reveal that the focus under NRHM will continue to be what was under the old Family Welfare and Disease Control programmes, that is family planning services, immunisation, ante-natal services, and selected disease surveillance and epidemic control. The NRHM along with RCH 2 adds a new focus on universalizing institutional deliveries and strengthening reproductive health services.

NRHM

NRHM is the health flagship programme of the UPA government. The preamble of the NRHM document states, “Recognizing the importance of Health in the process of economic and social development and improving the quality of life of our citizens, the Government of India has resolved to launch the NRHM to carry out necessary architectural correction in the basic health care delivery system.… The Goal of the Mission is to improve the availability of and access to quality health care by people, especially for those residing in rural areas, the poor, women and children.”

This goal will be achieved by strengthening the three levels of rural healthcare - the subcentre, PHC and CHC. At the village/hamlet level a health worker called Accredited Social Health Activist (ASHA) will be appointed, who will be the link worker for rest of the public health system in rural areas. Additional resource alllocation and upgradation of the facilities at each level has been planned under the Mission. But as yet the budget provisions even in the latest budget do not reflect such allocations.

The budget provisions when read into the NRHM document do not give any evidence of any radical changes within the public health sector. What it has achieved is perhaps larger allocations for rural healthcare but the character of those allocations doesn't seem to have changed much. They are still primarily family planning, immunisation and disease surveillance and don't address the demand of medical care which has been a longstanding missing link in rural public health services.

This approach entrenched in vertical programming will not lead to any significant impact even with larger resources being allocated. What needs to change is the way resources are allocated and used. The present mechanism of resources allocation is incremental to what exists and distribution of resources is ad hoc and not as per objectives of what a particular health facility has to deliver.

Thus allocations to rural hospitals are not based on what the design and objectives of the rural hospital demands but what the govt. is able to provide via a system of rationing of resources.

Conclusion

This needs to be changed if any significant progress in public health is expected. One way of changing this is using the mechanism of block funds, that is if a 30-bed rural hospital is set up with the objective of providing first referral care then it must be provided with adequate resources as a block grant. Existing evidence indicates that to run such a hospital, the resources required are Rs 300,000 per annum and this would mean that the rural hospital should be provided Rs 90 lakh.

On an average, presently a rural hospital in Maharashtra has a budget of about Rs 35 lakh. This is because more than half of the clinical positions are vacant and other supplies are inadequately provided for.

Apart from making adequate allocation of resources, what also needs to be changed is the authority to access these resources. So if a rural hospital is set up, then this quantum of resources should be made available to the local health authority who should have full autonomy in the use of these resources, including appointment of staff and purchase of commodities and services. Without entrusting such faith and developing capacities of the local health authorities to manage such resources independently, we will not be able to change the fate of the public health system.

The author is a consultant with CEHAT, Mumbai.
Email: raviduggal@vsnl.com