BUSINESS

Service aspect missing

INDIA DESPITE being a signatory to the Alma Ata declaration (1978) that aims at "Health for All by 2000," is quite far from the dream goal even in 2003. One of the factors for its inability to fulfil the objective of the declaration is the fact that public allocation of funds for the health sector has been consistently low at less than one per cent of the GDP, which is a mere fifth of the total health spending in the country. This is in sharp contrast to the state's share across the world — 5.5 per cent of the world's GDP and around 60 per cent of all health spending, according to the World Bank report.

Public health investment in India over the years has not only been relatively low but is also continuously on the decline as a percentage of GDP. It has fallen to 0.9 per cent in 1999 from 1.3 per cent in 1990. Because of inadequate facilities less than 20 per cent of the population seeking out-patient department (OPD) services and less than 45 per cent going for in-patient treatment avail public health services.

This lack of state interest in healthcare is reflected in successive budgets. However, this year's budget, which is inspired by the National Health Policy (NHP) - 2002, seems to correct the bias to a great extent as it has announced some innovative health sector initiatives. The budget has tried to provide some focus on this sector as health gets the first place among the five priorities enumerated by the Finance Minister.

Budget proposals

The sub-sectors that seem to have received attention in the budget are pharmaceuticals, biotechnology and healthcare institutions. The measures pertaining to health sector have been designed keeping in mind three objectives: (i) to contribute to enhanced national health; (ii) to promote India as a global health destination; and (iii) to enable easier access to health facilities for the disadvantaged sections of the society.

The important measures include (a) tax exemptions on income for financial institutions providing long-term capital to private hospitals with over 100 beds under Section 10 (23G) of the Income-tax Act and (b) in order to promote India as a healthcare destination and enable it to carve out a bigger pie of the $3.5 trillion world healthcare market because of the low costs here; a string of tax incentives that include scrapping of customs duty on samples required for clinical trials, abolition of duty on reagents and equipment to boost R&D activity. Waiver of excise duty and additional excise duty on many specified life saving drugs and life saving equipment which now attract 5 per cent basic customs duty is another incentive to the health sector. Allowing companies to import duty free equipment up to 25 per cent of the previous year's export instead of one per cent is yet another incentive that will encourage bio-tech R&D.

The most interesting of all proposals in the budget is the one pertaining to a nationwide health insurance scheme. The mechanism provides a means of risk sharing within the society. In India, the coverage of health insurance, whether public or private, is abysmally low around 3 per cent vis-a-vis 85 per cent in the U.S. and 98 per cent in Canada. This is despite the fact that as early as 1946 the Bhore Committee laid the guiding principle that "no individual should fail to secure adequate medical care because of inability to pay for it".

With 70 per cent of the population still living in rural areas and 95 per cent of the workforce in the unorganised sector, and a disproportionately large percentage of these populations living below the poverty line (BPL), there is an exigency to develop a social security mechanism for this segment. In this context, the current proposal is a major step to bring in equity. To make the scheme affordable to BPL families, the Government will contribute Rs. 100 a year to each of these families towards their annual premium.

Such a scheme has a wide policy implication. If the rural dwellers have the ability to pay for services through insurance schemes, there is a possibility that the private sector, especially the small-scale private healthcare providers, may feel encouraged to offer services in the remote areas in the hope of encashing on the purchasing power of these people.

The concerns

While many of the budget proposals evoke ecstatic acclaim, the vision to provide easier access to health facilities to the disadvantaged sections of the society has not really been given any serious thought while formulating some of the policies. This concern assumes even greater proportions when seen in the light of NHP-2002, which has formulated a number of goals to be achieved in the next 5 to 10 years including eradication of polio, leprosy, Kala Azar, lymphatic filariasis, reduction of IMR and MMR to 30 and 1 per 1000 live births respectively and achieving zero level growth of HIV/AIDS amongst others.

The budget provisions for health sector seem to focus more on enabling the private sector and have given little impetus to public health programmes. As of now, government spending in rural areas is not sufficient. On top of it, there is no mechanism to ensure that such spending reaches the poor and needy. A recent study by the NCAER has also found that public health subsidies are disproportionately distributed in favour of the richer groups.

In the light of the above finding, there are certain measures the Government could have attempted. (1) Adoption of policies to correct the above mentioned disparities, say, by shifting resources from hospital care (where the well-off utilise the services more) to primary health care centres (PHCs) (where it reaches the lower quintile of the economic class), (2) Stepping-up government expenditure especially on rural PHCs so as to reach the poor and the needy, (3) Strengthening that component of the private health sector which shall reach the poor; and (4) finally introducing some mechanism by which the poor can be insured against health care uncertainties and needs.

As mentioned, the two areas that the budget has tried to address are the incentives for the private sector and the health insurance scheme. Unfortunately, the proposed promotion of private sector also seems to have been made without giving much attention to the vast diversity of this sector. The concessions and promotions seem to be mainly for the tertiary sector hospitals and not really for the private general practitioners (GPs). This will further widen the existing rural-urban divide. Since the government provisions in the curative field are not enough, it is these GPs who should have been really diverted to the rural areas with adequate policy measures so as to give services in the rural areas or small towns, which desperately need them.

Any sharing of the burden of curative care from the public sector in rural areas implies the public sector will have more resources to tackle the issues related to public health. However, the current health sector promotion policies seem to have ignored the rural areas. Ironically, this is being done at the same time while efforts are on to attract overseas patients. The situation is indeed "poverty (of healthcare facilities for the rural dwellers) in the midst of plenty (of urban health facilities)" for the rural dwellers.

With respect to the insurance scheme, the budget is yet to suggest the modalities for implementation. Given the current level of access and availability of healthcare services in rural areas, it is difficult to fathom how far such a scheme is going to improve people's incentive to join? It also prompts another vital question — Will it lead to introduction of user fees for public services?

Budget allocations

The Budget provisions for health sector should be viewed from two angles: one that pertains to healthcare as an infrastructure industry, which is basically the domain of the private sector and constitutes more than 80 per cent of the sector in terms of provision and utilisation. And two, that which caters to it as a service, which in a mixed economy is considered the domain of the government sector. The budget provides various measures to promote healthcare as an infrastructure industry while the measures for healthcare as a service grossly fall short of expectations. In fact, increased budgetary allocation to the health sector needs to be viewed from the standpoint whether it can really make a significant contribution in reaching the proposed target of 2 per cent of GDP and 25 per cent of total government spending to be achieved by 2010.

The Notes on Demands for grants, 2003-04 show the budget allocations, net of recoveries for the proposed budget year. There has been no significant increase in the budget allocations for the various programmes under health, including Department of Health, Department of Indian Systems of Medicine and Homeopathy, and Department of Family Welfare. Rather, there has been some cut in the budget allocations under certain heads, including some of the important National Public Health programmes (Table 1). This, if considered in real value terms, will show a decline in budget allocations, which is quite unfortunate.

Though, in the 2003-04 budget, the share of total health allocations in the total allocations has increased to 1.74 per cent from the existing 1.64 per cent, the increase is mainly due to the increased allocation for the Family Welfare department rather than Public Health. Even under the Department of Family welfare, the allocations for rural family welfare services have declined from the budgeted Rs. 1,718 crores and the revised Rs. 1,662 crores this year to Rs. 1,563 crores next year. This is in contrast to the increase in allocations for urban family welfare programmes.

Thus, the budget 2003-04 presented by Mr. Jaswant Singh appears to have appreciated the old dictum that a "sound mind rests in a sound body". A number of concessions in the form of reduced excise, customs, or income tax exemptions have been announced keeping in mind healthcare as an infrastructure industry. The measures announced however fall well short of the NHP goals. This is because healthcare needs to be viewed from service point of view also.

While the budget extends the infrastructure status to the healthcare industry and provides tax benefits to private hospitals, certain questions arise: (a) If such sops lead to an increase in investment, aren't they going to be concentrated in the urban areas as past experience shows? (b) How is it going to benefit the rural communities? And finally, (c) Will it not lead to making the sector more profit seeking than service oriented?

Vinish Kathuria is an Associate Professor at Madras School of Economics, Chennai, and Deepa Sankar is an Economist with the World Bank, Delhi. The comments on the budget are the authors' own views.

Vinish Kathuria is an Associate Professor at Madras School of Economics, Chennai, and Deepa Sankar is an Economist with the World Bank, Delhi. The comments on the budget are the authors' own views.

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