Investing in health; boosting economy

Tomorrow, on the first day of February 2018, the union budget for 2018-19 will be tabled in Indian Parliament. Amongst the macro-economic discussions, there might be less attention on what happens to health sector. However, reality remains that the government funding for health sector in India has been traditionally low and does not match the stated policy intentions. Two often cited reasons for low allocation are: sector being inefficient and has limited absorption capacity. This is re-enforced by a few experts and policy makers, in select government institutions, who have systematically propagated the idea that higher investment on health by the government is not required and all that is needed is ‘increasing efficiency’ in utilization of available resources.

A closer and nuanced examination indicates that the government spending on health in India is extremely low at 1.15% GDP (Global average is 6% and China and Thailand spend upwards of 3.0% of GDP). In terms of expenditure per capita, this spending at US$ 20 is less than one –eighth of what China and Thailand spend in nominal terms. Experts have estimated that to delivering basic package of essential health services would require a per capita spending of US$ 86. There should not be reason to believe that India can achieve similar level of health outcomes at a fraction of what other countries spend. The discourse seems to have become ‘binary’ of efficiency or increased government investment. The voices with a balanced approach, though not necessarily in minority, have been sidelined.

The inefficiencies and limited absorption capacity of health sector has become two favorite whips to flog those demanding higher government funding for health. While it is true that, like any other social sector, spending on health sector is inefficient. A McKinsey and Co. report of 2014 estimated that health is amongst the least efficient social sectors in India. In a comparison of total of 20 Indian states, efficiency in health sector of 5 worst performing Indian states was reported to be one-third of five best performing states. Around two years ago, an unpublished analysis on utilization of government health facilities in India found that a quarter of all government health facilities delivered 3 quarter of all health services delivered through government facilities.

Undoubtedly, the inefficiency in health sector has to be addressed; however, ‘efficiency alone’ without increase in funding is not a solution either. The senior officials in ministry of health and family welfare keep demanding for more funding for health.  After all, the proposed initiatives such as transforming 150,000 health sub-centres into ‘Health and wellness’ centres’, increasing availability of human resources in public health system, and scaling up of free medicines and diagnostics schemes such as Pradhan Mantri Jan Aushadhi Yojana (PMJAY), launch of national health protection schemes, provision of range of services for emerging burden of non-communicable diseases- to list a few- would require additional financial resources from the government. If government hospitals in medical colleges have to meet ends and delay payment for essential supplies such as oxygen cylinders, it is lack of financial resources as well. Rather, not investing in health could be a costly proposition as India has been projected to lose more than double of its annual GDP at present, due to non-communicable diseases, by year 2030. Moreover, with unhealthy workforce, it will cost the country dearly in form of lost productivity and worker absenteeism. Healthy people are essential for accelerating and sustaining economic growth of a nation. Independent reports of the UN High Level Commission on health employment and economic growth, Harvard University and The Lancet have estimated that one extra year of life expectancy adds 4% to GDP and that for every Dollar spent on health, the return on investment is 9 times.

The discussion on absorption capacity of Indian states is an interesting & classical ‘egg and chicken’ problem. Much of challenges in absorptive capacity can be attributed to rigid and archaic administrative procedures, which leads to inefficiency. The recent reports that under ‘Smart Cities Mission’ of Govt. of India, less than seven percent of total allocated funds could be spent, reflects a similar malady. Therefore, increased financial allocation (to health or any other sector, for that matter) has to be combined with financial and administrative reforms, as well.

In summary, efficiency is a complementary approach to the primary remedy of increased government investment for health. The blinding focus on efficiency only should not become of an enemy of Indian poor, who rely on government investment to get better healthcare. Investment in health would contribute to accelerate and sustain the high rate of economic growth of India. It would be worth watching what is allocated to health sector in budget presented on 1 February.

(Views are personal.)