Health care finance in india


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Health care finance in india

  1. 1. HEALTH CARE FINANCING IN INDIA Presenter : Dr. Vishal Soyam, 03/09/14 1
  2. 2. Plan of presentation Introduction Healthcare finance mechanism Pattern of healthcare finance across world Healthcare finance in India Initiatives GOI Other model of financing Challenges & Recommendation 03/09/14 2
  3. 3. Health Care Finance Definition : “Function of a health system concerned with the accumulation, mobilization and allocation of money to cover the health needs of the people, individually and collectively, in the health system.” (WHO)  Purpose :  Make funding available  Set the right financial incentives for providers  To ensure that all individuals have access to effective public health and personal health care. 03/09/14 3
  4. 4. Cont…  Health financing linked to the provision of services and the system’s capability to achieve its stated goals.  Health financing is raising of resources to support to pay for goods and health services.  NEED? Scarcity of Resources – Need for judicious use Sustainability of resources Resource efficiency
  5. 5. Health is a human right. India is at an exciting and challenging period in its history. key focus area : Making healthcare affordable and accessible for all  The challenges: Nearly 73% of the country’s population lives in rural areas and 26.1% is below poverty line. India lacks strong healthcare infrastructure, Several inherent weaknesses in its healthcare system Dominant private sector in India, with 70% catered by it. Epidemiological transition Demographic transition Economic slow down Etc.
  6. 6. According to definition health financing is  Accumulation/collection  Mobilization  Allocation of money 03/09/14 6
  7. 7. Health Financing Mechanism Health care financing is about 3 questions: 1.How is the money raised? 2.How are funds pooled? And 3.How are services paid for? ANSWERS ARE : 1.Revenue Collection 2.Risk pooling 3.Purchasing of health services 03/09/14 7
  8. 8. 1. How is the money raised ??? Revenue collection : 4 main ways of raising money for health care: 1. Taxation-most equitable system of financing 2. Health insurance contributions  Social health insurance  Private health insurance  Community based health insurance 1. User pays (out of pocket, no reimbursement) 2. Donor funding/Grants 03/09/14 8
  9. 9. 2. How are funds pooled ??? Mobilization : Accumulation & management of Revenue with respect to Health Risk Subsidy Cross Subsidy Pooling to redistribute health risk Cross subsidy for greater equity 03/09/14 9
  10. 10. POOLING CONTRIBUTION (Across equal income) NET TRANSFER Low Risk High CROSS SUBSIDY (Across equal risk) Low Income High 03/09/14 10
  11. 11. 3. How are services paid for ??? Purchasing of health services : It is done by public or private agencies that spend money either to provide services directly or to purchase services for their beneficiaries. Purchaser : – – – – – Ministry of health (MOH) Social security agencies District health board Insurance organization Individual or household Purchasing 03/09/14 Passive strategic 11
  12. 12. Purchasing model It is based on the organizational relationships and contractual or purchasing relationships : First model : where the government owns the buildings and employs the staff directly. Second model: the patient provider contract, The patient pays the provider and then seeks re-imbursement from their insurer. Third model: the purchaser provider contract, The provider have to provide services to the patient but the payment is paid by funder (Govt & insurer). Fourth model: the patient pays the provider out-of-pocket and because the cost is not covered by insurer & it is not reimbursable. 03/09/14 12
  13. 13. 03/09/14 13
  14. 14. Allocation of money Through budgeting in public sector: BUDGET : Estimating the requirement of money to perform the activities during any particular period. Line item budgets : budget allocation for functional category, Global budgets : allocation to health facilities & typically depend on the type of health facility, historical facility budget, no. of beds or utilization rates for past years. Capitation : is a payment method that allocates predetermined amount of funds per year for each person enrolled with given provider or resident in a catchment area. 03/09/14 14
  15. 15. Patterns of healthcare financing across the world. Broadly, there are three patterns: The National Health Service (NHS) of the U.K. is a stark example of a state-run and publicly-funded system. the U.K. uses tax finances to pay for 80 per cent of its healthcare spending. In Europe, social insurance schemes bear most of the financial burden. The U.S. relies on private insurance, paid for mostly by employers: almost half of the supersized health spending (16 per cent of GDP) is financed by tax money for the care of the old and the very poor. 03/09/14 15
  16. 16. HEALTHCARE FINANCE IN INDIA 03/09/14 16
  17. 17. 03/09/14 17
  18. 18. Budget allocation in India Allocation of money through five year plan Annual allocation within the available five year funds. State Ministry of Finance (State have their own fund also) Ministry of health & FW Dept of health MOH M of FW M of AYUSH Govt Health provider 03/09/14 Other sector (Eg. Edu, social Welfare) Private provider 18
  19. 19.  Health Department in consultation with the Directorate prepares the list of continuing schemes and new schemes.  Discussed with Planning Commission meetings before finalization.  Plan for setting up new CHCs, PHCs, determined not on the need basis but centrally on the resource availability basis.  Final allotment of plan budget is approved  Transfer of budget to state from the ministry declined sharply from nearly 57% to 44%. 03/09/14 19
  20. 20. Budget Process  Plan vs Non-Plan budget.  Need based vs Resource based budget  Capital vs Revenue budget  Top-down vs bottom up approach
  21. 21. Performance Budget In which the purpose and objectives for which funds sought are very clear To bring out the programmes and accomplishments in financial and physical terms. Better understanding and better review of the budget by the legislature. To facilitate the process of decision making at all levels of government. To enhance the accountability of the management To render performance audit more purposeful and effective.
  22. 22. Cont.. I. Details of the structure of the organisation, the purpose and objectives, achievement, and work needed to be done more specifically during the budget year. II. The financial requirement under programme wise classification and items wise expenditure. III. Explanation for the financial requirements given in part II.
  23. 23. Zero base Budgeting  It focuses on a thorough review of expenditure to evaluate its continued utility to serve a specific purpose or a clearly stated objective.  In conventional budget ‘base’ to which increment is added is treated as authorised and is not reviewed.  In ZBB the activities of an organisation should be viewed afresh and the priorities decided.
  24. 24. Indicators for assessment of healthcare financing 1. Total expenditure on health as % of GDP 2. Per capita total health exp. at average exchange rate 3. Govt exp. on health as % of total Govt exp. 4. Public spending on health as % of total health exp. 5. Out of pocket spending as % of private expenditure on health 6. Donor spending on health as % of total health spending 03/09/14 24
  25. 25. Cont… 7. % of govt health budget spent on outpatient/inpatient care 8. % of govt health budget spent on1. Salaries of worker 2. Medicine and supplies 3. Other recurrent cost 8. Health Insurance: 1. % of population covered by various insurance scheme 2. Social security exp on health as % of general govt exp on health 03/09/14 25
  26. 26. Total expenditure on health as % of GDP It is a share of a country’s total income that is allocated to health by all public, private & donor services It should be between 2-15% of GDP The provisional estimates from 2005–06 to 2008– 09 shows that it has come down to 4.13% in 2008– 09 from 4.25% in 2004. (source- NHA 2004-05) India’s total expenditure is comparable with other Asian countries . Global average - 8.3%. 03/09/14 26
  27. 27. International Comparison of GDP Spending
  28. 28. GDP spending on health in India 03/09/14 Source:World Health Statistics, (2007 &2008),WHO 28
  29. 29. Contributors Public expenditure  Central  State  Local bodies  Private expenditure  Household  Insurance companies  Firms  NGOs  External flow  Bilateral/multilateral agencies 03/09/14 29
  30. 30. Per capita total health exp. The per capita health expenditure for India in 2004–05 was Rs. 1201 of which the share of public was Rs. 242 (20.18%) and that of private was Rs. 959 (79.82%). (NHA 2004-05) Inequity in rural-urban allocation by state and central govt. Majority exp by private sector 03/09/14 30
  31. 31. Public exp. on health as % of total govt exp. The share of public expenditure in GDP has increased to 1.10% in 2008–09 from 0.96% in 2005–06. and again decrease to 1.04 in 2011-12. Even this small public expenditure is skewed towards the richer groups, particularly those living in urban areas Public exp. As share of GSDP <1% for all states. 03/09/14 31
  32. 32. Public health spending & indicators Indicators % population Infant with income mortality < 1 doller/day % health expenditure to GDP % public expenditure to total exp. INDIA 44.2 70 5 17.3 CHINA 18.5 31 2.7 24.9 SRI LANKA 6.6 16 3 45.4 UK - 6 5.8 96.9 USA - 7 13.7 44.1 03/09/14 32
  33. 33. Distribution of total health expenditure amongst public provider 03/09/14 33
  34. 34. Structure of Public health sector NCMH 2005 spending by state govt.
  35. 35. OOP Spending as % of Pvt. Expenditure on health 03/09/14 35
  36. 36. Share in Healthcare Spending 2005(%) (World Health Statistics 2008,WHO) COUNTRIES Private exp of total exp on health OOP of private exp on health OOP of total exp on health Bangladesh 70.9 88.3 62.6 Brazil 55.9 54.6 30.5 China 61.2 85.3 52.2 India 81 94 76.1 Indonesia 53.4 66.4 35.5 Malaysia 55.2 75.7 41.8 Mexico 54.5 93.9 51.2 Pakistan 82.5 98 80.9 Philippines 63.4 80.3 50.9 Sri Lanka 53.8 86 46.3 South-east Asia 71 90.4 64.2 South Africa 58.3 17.4 10.1
  37. 37. 03/09/14 37
  38. 38. Despite poor health indicators, Govt spending on health care is well below what is needed Reason being: – Low revenue collection – Competing demand for revenue – Relatively low spending priority Consequently, limited access to public health care facilities forces people to go to Pvt. Provider, resulting in substantial out of pocket (OOP) spending, specially for the poor. 03/09/14 38
  39. 39. Around 24% of all people hospitalized in India in single year fall below the poverty line due to hospitalization (WB, 2002) Those in the bottom four income quintile borrow money or sell assets to pay for hospitalization. (WB, 2002)  OOP expenditure needs to be reduced as it aggravates the inequities by impoverishing the poor further.  Therefore, the role of the Govt. assumes importance in this context. 03/09/14 39
  40. 40. Of the total OOP expenditure by household in 2004–05: rural - 62% ; urban - 38% Among various components highest expenditure was incurred on medicine both in public and private health care institutions – public health care - 66% of expenditure in rural areas & 62% in urban areas. The component wise analysis showed that about Out patient care - 66.10% In patient care - 23.48%, Delivery - 3.43% and on Family planning services - 2.83%. 03/09/14 40
  41. 41. Reasons of Rising OOP Exp. A major expenditure item is drugs: – With the patent regime and the deregulation of administered pricing regime, – Irrational use of drugs – Prices of new drugs and – Drugs for many NCDs - unaffordable to majority of the poor – Non availability of drugs to outpatient & inpatient in the public sector. Doctor’s fee was another critical component. Non availability of investigation facility in public sector 03/09/14 41
  42. 42. Three drives of cost escalation in health care system. 1.Resources for health care 2.Efficacious and affordable drug regime 3.Access and availability to appropriate technology 03/09/14 42
  43. 43. % of Household falling to BPL NSSO 2004 Inpatient Outpatient Total Rural 1.3% 5.3% 6.6% Urban 1.2% 3.8% 5.0% Total 1.3% 4.9% 6.2%
  44. 44. Health expenditure by functions Sr no. Health Care Functions % Distribution 1 Tertiary care 22.45 2 Secondary care 15.32 3 Primary care (41.26) a) SC/PHC/Dispensaries b) Public Health programme 11.27 c) Family welfare 13.04 d) Rehabilitative care 4 16.58 0.38 Direction and Administration 10.07 Health statistics and research 2.25 6 Medical stores 1.76 7 Medical reimbursement/compensation 4.13 Functions not specified 2.76 Total 100 03/09/14 44
  45. 45. Health expenditure by functions Sr no. Health Care Functions % Distribution 1 Curative Care 42.67 2 Rehabilitative & Long term Nursing Care 0.28 3 Ancillary Services related to Medical Care 2.33 4 Medical Goods Dispensed to Outpatients 0.92 5 Prevention and Public Health (20.79) Services 1. RCH & Family welfare 12.07 2. Control of communicable diseases 6.82 3. Control of NCDs 0.91 4. Other public health activities 0.98 6 Health Administration & Insurance 9.69 7 Health & related functions (17.3) 1. Medical Education and Training of Health Personnel 2. Research and Development 5.33 4. Nutrition Programme 0.08 5. Food Adulteration & Control 9 2.03 3. Capital Formation 8 9.56 0.30 Functions from other Sources 4.99 Functions not Specified 1.1 03/09/14 45
  46. 46. Health insurance Mutual support system based on notion that “ I will help you in your current need , you to give me help when I need it. Insurance : means it ensures every individual contributors that they don’t have to pay full cost of care out of pocket in the event of illness 16 % population covered by any form of insurance. Types:  Social health insurance  Private health insurance  Community based health insurance 03/09/14 46
  47. 47. Social Health Insurance ESIS :  Supplemented by the Central and State governments.  Its own network of dispensaries and hospitals, supplemented by some outsourced Authorized Medical Attendants and private hospitals.  Also has ‘Cash Benefits’ which compensate for loss of wages due to disease/ disability/ death.  Covers over 50 million persons presently. CGHS :  Covers 3.2 million persons. It has its own dispensaries while hospital services are outsourced. Both provide comprehensive ambulatory and hospital care without any annual limits.
  48. 48. Community Health Insurance Small schemes, community-based and not-for-profit motive. Managed by community members, and accountable back to members. ‘Facilitators’, usually NGOs, may play an important role. May outsource part (or all) of risk and/or health services provision through tie-up with hospitals, insurers.  Gujarat: Self Employed Women’s Association (SEWA)  Maharashtra: Sewagram, Wardha  Gujarat: TribhuvandasFoundation (TF), Anand
  49. 49. Private Health Insurance  Voluntary health insurance scheme, with over 300 products from over 30 insurers competing in the market today.  Exclusions, wait periods, sub-limits and other policy conditions are structured by insurers to avoid adverse selection, information asymmetry and moral hazard. Not well understood by customers-issue of confidence.  Cover about 60 million people presently (excluding Government-funded schemes), roughly equally shared between Corporate (group) insurance plans and Retail (individual/family) plans.  TPA to facilitate speedier expansion by providing an administrative-intermediary.
  50. 50. State Health Insurance Scheme  Rajiv Arogyashri - AP  Kalaignar -TN  Vajpayee Aarogyashri- KA  Yeshaswini -KA
  51. 51. User fees/community financing User fees: Any payment made by beneficiaries directly to the health care service providers at the time of delivery of health care services Alternative cost recovery mechanism of health financing Mudaliar committee : 1st advocated levying of small fee on availing hospital services, except poor NHP 2002 : recognize the practical need for user charges Obj :To generate ‘revenue’ for ‘cost recovery’ When the community pays for services, it learns to demand and value them (remove unnecessary demand) 03/09/14 51
  52. 52. Currently, almost all states in India have introduced user fee in Govt. health facility for people above poverty line. The collected revenue is deposited in Govt. treasury or used for improving those facility. Few states formed society to collect and utilize fund locally. Implications: – – – – – 03/09/14 Increase efficiency of health services Remove the long queue for free health care services. Improve equity Improve quality of services sustainable 52
  53. 53. Initiative by GOI At National level NRHM RSBY At State level State health insurance 03/09/14 53
  54. 54. NRHM Launched in 2005 – to provide universal access to equitable, affordable and accountable quality health care Better staffing as per IPHS and human resource developmental policy, untied fund etc. Rogi kalyan samiti User charges started at CHCs and higher level hospital. Bottom up approach has adopted During 11th plan there was 4 fold increase in budget allocation to health sector. Out of this 65.7% was proposed for NRHM. In 12th plan, there has been more than two fold increase over 11th plan budget. But failed to achieve 2-3% of GDP. 03/09/14 54
  55. 55. Rashtriya swasthya bima yojana It is a central Govt. health insurance scheme to meet the health needs of the poor Centre: state – 75 : 25. in North east 90:10. The maximum premium by the central Govt. is limited to 750 per insured family/yr. Benefits: – – – – – 03/09/14 Hospitalization expenses upto Rs 30,000 Maternity newborn care Day care services Transportation cost (Rs.100/visit, limit of 1000/yr) Cover all preexisting diseases 55
  56. 56. 12th plan initiative Universal health coverage Private sector has to be partnered for health care delivery. Government Sponsored HIS should enroll private providers for in-patient care & ambulatory care, via ‘contracting-in’ mechanism Essential Medicine List needs to be brought under price control mechanism, Incentivization of states Flexibility in central funding for state 03/09/14 56
  57. 57. Other Models of financing Public private partnership (PPP) Medical Tourism FDI in Health sector Resource generation by Facilities and colleges 03/09/14 57
  58. 58. Medical tourism India’s medical tourism is also booming It is the provision of cost effective medical care with due consideration to quality for foreign patients who need specialized treatment surgery Indian health market growing at a rate of 30% annually. Medical tourism alone can contribute Rs 5000 to 10,000 crore additional revenue by 2012 & will account for 3-5% of the total health care delivery market. 03/09/14 58
  59. 59. Challenges PPP: cost escalation. Invariably expensive drugs and procedures are prescribed. Insurance companies provide health cover to the young, the employed and the rich, and avoid those who are elderly, unemployed and poor. There is a cozy relationship between the insured, the insurance company and the healthcare provider. 03/09/14 59
  60. 60. Challenges Insurance covers only the cost of hospitalisation and not expenditure on outpatient care. NHA statistics show that close to 70 per cent of the out-of-pocket expenditure of the household is for outpatient care, which will not be covered by insurance. In the Indian situation where a majority of the people are self-employed, universal coverage will remain a mirage Many villages in India do not have a hospital worth the name within accessible distance. What use would insurance cover be for people living there? 03/09/14 60
  61. 61. Recommendations The future has to be tax funded. Preventive, primary and some part of secondary treatment has to be completely free, cashless and provided by the government and funded through taxes.” Systems to track & audit expenditures against budget authorization Community based research for credible burden of disease. 03/09/14 61
  62. 62. Recommendations Develop public private partnership. Increase spending on health promotion: 10%- 20% Rationalizing & restructuring public health delivery system. Integrating AYUSH-increase in human resource. Raise additional resources by imposing taxes on health degrading products, eg, tobacco. 03/09/14 62
  63. 63. References National Commission on Macroeconomics & Health 2005. World Health Report 2003 Trends in healthcare financing 2010 National Account Statistics NSSO and Consumer Expenditure GoI Healthcare in India: Changing the Financing Strategy Financial Resource Management (Nihfw) Module Health Policies and Programmes in India, Dr D K Taneja National Health Programmes of India, Dr J Kishore Shivakumar A K, chen L C, chaudhary M et al Financing health care for all: challenges and opportunities. Lancet 2011; 377: 668–79.
  64. 64. “Health systems financing: The path to universal coverage” 03/09/14 64