Moving away from 1% -Soumitra Ghosh
Sluggish health spending can be reversed with a substantial increase in the allocation for health in the Union Budget
India’s neighbours, in the past two decades, have made great strides on the development front. Sri Lanka, Bangladesh and Bhutan now have better health indicators than India, which has puzzled many. How could these countries make the great escape from the diseases of poverty earlier than their much bigger neighbour? India’s health achievements are very modest even in comparison to large and populous countries such as China, Indonesia or Brazil.
Therefore, it is imperative to understand why India is not doing as well as these countries on the health front. Looking at other developed and transitional economies over many years, two important trends can be discerned: as countries become richer, they tend to invest more on health, and the share of health spending that is paid out of the pocket declines. Economists have sought to explain this phenomena as “health financing transition”, akin to demographic and epidemiologic transitions. The point to be noted is that similar to these transitions, the health financing transition is not bound to happen, though it is widespread.
As with the other two transitions, countries differ in terms of timing to start the transition, vary in speed with which they transition through it, and, sometimes, may even experience reversals. Economic, political and technological factors move countries through this health financing transition. Of these, social solidarity for redistribution of resources to the less advantaged is the key element in pushing for public policies that expand pooled funding to provide health care. Out-of-pocket payments push millions of people into poverty and deter the poor from using health services. Pre-paid financing mechanisms, such as general tax revenue or social health insurance (not for profit), collect taxes or premium contributions from people based on their income, but allow them to use health care based on their need and not on the basis of how much they would be expected to pay in to the pooled fund.
Hence, most countries, which includes the developing ones, have adopted either of the above two financing arrangements or a hybrid model to achieve Universal Health Care (UHC) for their respective populations. For example, according to the World Health Organisation’s recent estimates, out-of-pocket expenditure contributed only 20% to total health expenditure in Bhutan in 2015 whereas general government expenditure on health accounted for 72%, which is about 2.6% of its GDP. Similarly, public expenditure represents 2%-4% of GDP among the developing countries with significant UHC coverage, examples being Ghana, Thailand, Sri Lanka, China and South Africa.
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