Adequate public investment in health, by ensuring better affordability and availability of health care, is crucial for sustaining a resilient public health system. Low public health spending can result in catastrophic out-of-pocket expenditure (OOPE), pushing households in the lowest income groups further below the poverty line. A World Health Organization (WHO) study published in March 2022 noted that high OOPE on health impoverishes 55 million Indians, annually.
National Health Accounts (NHA) 2019-20 estimated India’s government health expenditure at 1.35% of Gross Domestic Product (GDP). India’s low government health spending is often attributed to its low tax-GDP ratio (12% in 2018). However, many other emerging economies with similar or even lower tax-GDP ratios spend much more on health than India (Chart 1). Although these metrics are deeply influenced by several country-specific factors, they reflect India’s poor performance in prioritising public health on a global scale.
Low public health spending in India has resulted in high OOPE. NHA 2019-20 estimated OOPE as 52% of the current health expenditure, as against the world average of 18%. At the state level, large variations exist in public health spending. There is also no uniform pattern of the relationship between public health spending and OOPE in India (Chart 2).
In five states (Assam, Chhattisgarh, Himachal Pradesh, Jammu and Kashmir, and Rajasthan), high public health spending (as percentage of GSDP) is related to low OOPE (as percentage of GSDP), while in four states (Andhra Pradesh, Kerala, Punjab, and West Bengal), low public health spending is related to high OOPE. Both patterns are expected as public health spending and OOPE generally have an inverse relationship. However, two other unexpected patterns are also observed. In eight states (Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Telangana, and Uttarakhand), low public health spending is related to low OOPE, while in four other states (Bihar, Jharkhand, Odisha, and Uttar Pradesh), high public health spending is related to high OOPE. Three explanations could be offered for the unusual patterns.
First, the relationship between low public health spending and low OOPE is found in states with high per capita GDP. Therefore, even with below-average health spending (as percentage of GSDP), these states spend large amounts on health in absolute terms, resulting in lower OOPE. In contrast, in economically weaker states even higher health spending as percentage of GSDP does not generate a large increase in absolute terms, resulting in high OOPE. For instance, the per capita GDP in Haryana (the state with the highest per capita income) was almost six times that in Bihar (the state with the lowest per capita income). The cost of healthcare may vary from state to state. However, it is not expected to be so materially different in an economically weaker state vis-à-vis an economically well-off state.
Second, a large proportion of households in economically well-off states can afford health insurance relative to that in economically weaker states. For instance, the National Family Health Survey-5 (NFHS-5) estimated that only 15.9% and 17.4% of households in UP and Bihar have at least one usual member covered by any health insurance or financing scheme. However, the percentage of households with insurance was as high as 80% in Andhra Pradesh and above 63% in Tamil Nadu, Telangana, and Uttarakhand. It is also significant that Rajasthan, Chhattisgarh, and Assam have a high percentage of households with health insurance at 88%, 71% and 67%, respectively. Therefore, OOPE is low in these states even though the per capita GDP is lower than in many rich states.
The third explanation relates to the poor quality of public healthcare in economically weaker states. For instance, 80% of households (based on NFHS-5) in Bihar and 75% in UP do not generally use a government health facility, mostly due to poor quality of care. This large number of households with a perception of poor quality of public healthcare facilities is not found in other states.
There are also some idiosyncratic factors creating high OOPE in some states. OOPE in Kerala is over 3% of GSDP, while its health spending is at the all-India average. The population in Kerala has higher health-seeking behaviour than that in other states. Kerala has the highest proportion of ailing persons (24.5%) and the highest hospitalisation rate (105 hospitalisation cases per 1,000 persons based on the National Sample Survey 75th round).
One of the objectives of PM-JAY is to reduce OOPE. PM-JAY covers all expenses incurred for hospitalisation for some specific diseases. However, based on NSS 75th round estimates, for outpatient treatment, 70.3% of expenses were incurred on medicines, 13.3% on doctor’s/surgeon’s fees, 12.6% on diagnostic tests and 3.8% on other medical expenses.
To conclude, while OOPE is generally high in India, it is more so in economically weaker states. It is distressing that those who need medical attention the most receive the least. This ‘inverse care law’ of Tudor (1971) needs to be broken by making concerted efforts by all concerned.
The need is to increase (i) public health spending in a time-bound manner, especially on primary health care; (ii) expand health insurance coverage to include out-patient treatments; and (iii) improve health care services in public facilities. Medicines, in general, should be made affordable, and life-saving ones should be provided cost-free as this is critical for reducing OOPE in vulnerable populations.
This article is authored by Janak Raj, senior fellow and Harshini Kumari Rathore, former intern, Centre for Social and Economic Progress.
Dr. Susanna Ashton has been practicing medicine for over 20 years and she is very excited to assist Healthoriginaltips in providing understandable and accurate medical information. When not strolling on the beaches she loves to write about health and fitness.