1. Health Financing in
India

2. Agenda
What is a health system?
What does health financing provide ?
What are the functions of health financing
mechanisms?
What are the sources of health financing in India?
Comparison of health financing of India with other
countries
Health Investments in India

3. What is a health system?
A health system is the sum total of all the
organizations, institutions and resources whose
primary purpose is to improve health.
A health system needs staff, funds, information,
supplies, transport, communication and overall
guidance and direction.
A health system needs to provide services that are
responsive and financially fair, while treating people
decently.
Source: http://www.who.int/topics/health_systems/qa/en/index.htm

4. What are the functions of health financing
mechanisms?
Source: Schieber G, Baeza C et al, Financing Health Systems in the 21 st century, Chapter 12, Disease Control Priorities in Developing

5. Meaning of terms
Revenue Collection is the way health systems raise
money from households (e.g. taxes, user fees,
private health insurance), business (e.g. taxes,
private health insurance, social health insurance),
external aid (e.g. grants, loans)
Pooling deals with collection and management of
revenues so that members of the pool share
collective health risks
Purchasing refers to the mechanisms used to
purchase services from public and private providers

6. Health Financing Mechanisms
Providers
Risk Pooling Entity
Private Health Insurance
General Taxation Social Health Insurance
Out-of-pocket
expenses
Tax Collector Social Insurance Revenue Collector
Taxes
Employers & Consumers
Adapted from: Mossailos E; Dixon A: Funding healthcare in Europe: weighing the options, European Union: 272-300:2000

7. What are the sources of health financing in
India?
Source: Kataria,M., Finances of Health Care Services (BOP-WHO Workshop-1995)

8. Source of Funds % Distribution
(a) Public Funds
Sources of Financing Healthcare in India
Central Government 6.4
State Government 12.6
Urban Local Bodies and PRIs 1.3
Total (a) 20.3
(b) Private Funds
Households 72.0
Firms 5.3
NGOs 0.1
Total (b) 77.4
(c) External Support
Grants to Central Government 1.5
Material Aid to Central Government o.1
Grants to State Government 0.2
To NGOs o.5
Total (c) 2.3
Total funds 100.0

9. Statement of funds for health care in India
Estimated health expenditure in India =Rs 108,732 crore
or 4.8% of GDP at current market price
Source: National Health Accounts, 2005

10. Health Expenditure as compared to other
countries
Indicator India China USA Sri Lanka Thailand
Health Expenditure as % of 4.8 5.8 14.6 3.7 4.4
GDP
IMR/1000 live-births 68 <30 2 8 15
Under-5 mortality/1000 live- 87 37 8 15 26
births
Higher health expenditures does not necessarily result in
better health outcomes

11. Public Expenditure on Health as % of GDP
(2004 data)
Source: UNDP, Human Development Report 2008

12. Government Health Expenditure
(as % of GDP)
Source: RBI Bulletin, Expenditure Budget, Govt of India

13. Contribution to Health Expenditure by
Central and State Government (as % of GDP)
Source: RBI Bulletin, Expenditure Budget, Govt of India

14. Impact on state spending on health due to
FRBM Act
Total Revenue Expenditure by All States as % of GDP
Source: Revenue Accounts, Various states

15. Extent of under-utilization of Health Budget
(%)
-: Overspent, +: Underspent
Source: RBI Bulletin

16. Trends in Public Health Expenditure
Public Expenditure on health is less than 1.2 percent
of GDP (WHO recommendation- 5% GDP)
In Maharashtra less than 2% of total state
expenditure is on health (Standing Committee
recommends around 5% of total state expenditure
should be on health). In the year 2001-02 around
2.47% of total state expenditure was on health,
which had decreased to 1.87% in the year 2004-05.
Only 17% of BMC’s budget for health (about Rs 9.75
billion in 2006) (Mandated is 1/3rd of budget)
86% of BMC’s public health budget is endowned on
four major hospitals (KEM, Nair, Sion, Nair Dental)

17. Structure of Health Sector Spending
Budget Heads % Allocated
Salaries and Wages 70
Drugs, medicines, supply, 12
Purchase of equipment and machinery 8
Maintenance of equipment, buildings, 5
electricity, rent, taxes etc
Other routine expenditures 5
TOTAL 100%

18. Hospitalization Treatment-All India
Source: NSSO 60th round

19. Non-Hospitalized treatment-All India
Source: NSSO 60th round

20. Trends in health services utilization
Percentage distribution of cases of hospitalized treatment in urban areas
by type of hospital during 42nd, 52nd and 60th NSSO rounds
70
60
50
Percentage
40
30
20
10
0
42nd 52nd 60th
NSSO rounds Government
Non-Government
Type of Hospital NSSO 60th round NSSO 52nd round
The NSSO 60 round mentions
th
an increase in both utilization Government Hospitals 3877 2195
of private sector utilization and
hospitalization expenses in Private Hospitals 11533 5344
urban areas as compared to
Any hospital 8851 3921
NSSO 52nd round

21. Health Insurance Landscape in India
Total Population 1.2 bn (Oct 04)
Private sector enterprise 55,000,000
Community Health Insurance 07,000,000♦
CGHS 40,000,000
ESIS 38,000,000
Private Health Insurance (Mediclaim) 17,000,000
Indian Railways 07,000,000
Uninsured 943 million
Source: Industry data 2004, ♦ ILO

22. Limitations of Existing Insurance and Social
Security Mechanisms
10% of population are covered through any form of
health security
0.4% of informal sector population have any sort of
social security (NCEUS, 2007)
ESIS, CGHS and ECHS- social security mechanisms
are only for formal sector
Government social security mechanisms are BPL-
targeted (estimates are that only 70% of population
have ration cards and many of populations are not
actually poor)
Most newer government financing schemes are
insurance-based e.g. RSBY

23. Contd...
Only about 6-7% of population has some sort of
coverage
Health insurance penetration is low- only 3% of
population covered
Of which 50% of them are under social insurance,
23% under private health insurance and rest 17%
under community health insurance

24. Impact on households due to lack of health
security and low public health spending
 6 - 8% of patients who fell ill did not seek care because of
financial reasons1
 Among those who sought care
About 25% of hospitalised patients are impoverished2
Every year, an additional 3.7% of the population is
impoverished because of medical causes3
Medical care is one of the 3 main causes of
impoverishment in the country4
Medical inflation stands at 13% CAGR (Compared to 7%
CPI and 7.3% urban income growth and 1.9 % rural income
growth)
1- NSSO 60th round
2- World Bank, 2002
3- van Doorslaer,E; O'Donnell O; Rannan-Eliya RP; et al. Effect of payments for health care on poverty estimates in 11 countries in Asia: an
analysis of household survey data. Lancet 2006
4- World Development Report 2004

25. Way Forward ???
High Middle Low Poor Very poor
income income income
Formal SHI + PHI SHI + PHI SHI NA NA
sector
Self PHI PHI CHI CHI NA
employed
Informal PHI PHI CHI Social assistance
sector
Unemployed NA NA CHI Social assistance
Acknowledgements: Dr N Devadasan

26. THANK YOU