Healthcare Expenditue in Pakisan

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Tokyo, Japan

National Graduate Institute for Policy Studies

Health Care and Income Distribution in

Pakistan

Public Economics

By : SHAH, Mukhtar Paras

PAKISTAN

August 2011


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Abstract

Health is a non-excludable public good. Efficient provision of this public good is connected

with marginal costs and marginal benefits. The Expected Value in this case are indicatorsof Human Development and thus the government has to invest in spite of the fact that

people are not willing to pay the costs. At individual level there is a need for interventions

in health care for those who want a secure life without economic difficulties. Government

interventions in health sector of Pakistan have been insufficient and inequitable. There is

need of reforms in health care in partnership with private sector to improve access to

health care.


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Table of Contents

Healthcare and income distribution in Pakistan" ................................................................................ 3

Introduction..................................................................................................................................... 3

HDI and Health Expenditure in Pakistan ........................................................................................ 3

Medium Term Draft Framework..................................................................................................... 6

Access to Health Care Services........................................................................................................... 7

Maternal and Child Health Care .................................................................................................... 7

Policies affecting health care............................................................................................................... 8

Income Distribution..................................................................................................................... 8

Regional inequalities ................................................................................................................... 9

Inequality in health expenditures ................................................................................................ 9

Role of Private Sector ............................................................................................................... 10

Absence of Health Insurance System ........................................................................................ 11

Findings............................................................................................................................................. 11

Conclusion......................................................................................................................................... 12

References ................................................................................................................................. 12


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with maternal and child health. National health programs and projects are usually funded by

international financial institutions and thus remain ineffective because of lack of ownership.

Table 1

Governments usually subsidize health care services in order to attain better and productive

human resources that ultimately create a healthy labor force. This subsidy can take the

burden of the cost, wholly or partially in any form of health care service. In Pakistan there

are 74 doctors for every 100,000 people, which is neither good nor bad. The doctor to

nurses ratio is 3:1 whereas WHO recommendation is 1:3. The volume of transfers to health

sector can vary from country to country as they allocate resources keeping in view the

outcome expected as a result of this investment. The main question is that who will benefit

from government subsidy in health sector? Keeping in view the target groups and outcomes,

the governments earmark funds for the health sector. If Pakistan is allocating only 0.23% of

the GDP (Economic Survey of Pakistan,2011) for the health of 180 million people, there

should be some method in this madness. But is there a method in fact?

Economists term the government expenditure as progressive if the maximum beneficiaries

are from low income group and otherwise the expenditure is regressive if the benefit of

policies and services go to the privileged class. The concept is explained in Figure 1 that

explains the phenomenon with the help of Lorenz Curve.


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Figure 1

Lorenz Curve

It is therefore a good debate whether the government expenditure for health sector in

Pakistan is progressive or regressive. The provincial governments run the hospitals and all

policies and programs in health sector are introduced for the general public especially the

poor. But around 70% of the regular expenditure goes to salaries and purchase of

equipment and medicines in hospitals. Only 0.55% goes to maternal health sector, 18.37 for

health facilities and prevention measures and around 10% for other expenses (PRSP

Annual Report). Table 2 gives a more detailed account of the current and development

expenditures in the health sector. It is this mode of distribution of resources that result in

distortion of services for the common people. The privileged class such as public officeholders and officials has rapid access to government facilities whereas the general public

waits for hours altogether to seek a prescription and usually the medicine counter does not

give them medicines as well. They have to purchase the medicines by themselves and it has

also been seen that general public prefers to go to private doctors because of the non-

satisfactory attitude and service at government hospitals. It is an established fact that poor


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and ordinary people seldom get maximum benefit from government subsidy or intervention

in the health sector in Pakistan.

Table 2

Health Expenditure in Pakistan

Rs.billions

Medium Term Draft Framework

According to Medium Term Draft Framework (MTDF); the financial outlay for health

during 2005-10 has been Rs.85 billion and the allocation of expenditures in various sub-

sectors has been as explained in Table 3.

Table 3


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The above table explains it all that there has been huge disparities in division of resources

in various sub-sectors which ultimately have an influence on the access of health services

required at grass-root level.

Access to Health Care Services

According to Economic Survey of Pakistan (2011), the country has 144,901 registered

doctors, 10,508 dentists and 73,244 nurses. There is one doctor for every 1222 people, one

dentist for every 16,854 persons and one bed for every 1701 citizens. There are 972

hospitals (urban centres) with 104,137 beds, 4842 dispensaries and 5344 Basic Health

Units in rural areas. The targets for the financial year 2010-11 have been explained in Table

4 that indicates that there have been no big targets and emphasis is on expanding services in

terms of recruitment and purchases. How can the facilities be made effective in terms of

public service delivery, is a missing link in the budgeting exercise.

Table 4

Targets and Achievements in 2010-11

Maternal and Child Health Care

According to official documents released by Ministry of Finance, Pakistan is presently

aiming at the following targets in respect of Child Health Care:

Reduction of maternal Mortality from 276 to 175/100,000 live Births. Reduction of Neonatal Mortality Rate from 54 to 40/1000 live Births.


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Reduction of Infant Mortality rate from 72 to 55/1000 live Births. Reduction of Under 5 Mortality rate from 94 to 65 per 1000 live births. Increase in the proportion of deliveries attended by Skilled Birth attendants at home

or in health facilities to 90 percent from 39% (current).

Increase in Contraceptive Prevalence Rate (CPR) from 30 to 55 percent.The expenditure on Mother and Child Health Care in Pakistan may have been termed

progressive as its major beneficiaries are poor people. But the natural question is that how

much funds have been made available to achieve the targets and how many beneficiaries

have actually benefitted from the intervention. The allocation for health sector has been

drastically reduced in 2011-12 as a result of economic pressure in the wake of slow growth

in the economy. This is the true proof of the academic principle of public economics that

politicians can easily divert funds from sectors such as health and education as they are

more interested in sectors that can give them immediate results and political leverage. They

are more interested in building highways rather than in reduction of HIV. It is a fact that

Mother and Child Care continues to be the most neglected sector in health sector of

Pakistan.

Policies affecting health care

Income Distribution

One reason for poor and inadequate health facilities in Pakistan is the population and its

growth rate. Distribution of income and services cannot be equitable in the wake ofchallenges posed by the number of recipients that exceed the available resources. The

expenditures in health sectors are overall progressive in Pakistan while it is regressive in

some sub-head expenditures of health at provincial and regional levels. The extent of

inequalities in the four provinces of Pakistan in health sector is given below in Table 5.

Table 5

Access to Health Services


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Regional inequalities

Some Studies have found great disparities and inequalities across regions and among

quintiles. The share of lower quintile in the Hospitals and Clinics expenditures is only 7

percent while it is 36 percent for the higher quintile in Pakistan over all (Akram, 2007). Therural-urban divide is more evident in the case of health care services. The doctors do not

want to work in rural areas where the 60% of the population lives. Basic Health Units have

been the only network of health facilities in rural areas but with only basic services. The

doctors appointed in these BHUs usually do not appear as they have their private practices

in urban centers and BHUs are run by paramedical staff who has been involved in corrupt

measures such as sale of government purchased medicines in the market. On regional basis

this divide is more dangerous as the most backward areas such as Baluchistan has

inadequate health facilities; partly because of geographical outreach difficulties and partly

because of patriarchal and tribal cultures that do not encourage females to visit doctors. In

critical conditions patients in these deprived regions rush to bigger urban centers in other

provinces such as Sind and Punjab. The availability of health services in rural Pakistan in

all the four provinces is explained in Table 6. The dismal picture explains that people in

these regions have been living without a choice.

Table 6

Availability of Health Services

Inequality in health expendituresLarge inequalities in the shares of the different quintiles in health expenditures cannot be

rejected. Table 7 gives an account of expenditures being undertaken by the government in

its provinces.


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Table 7

Distribution of Health Services by Sector

Overall, the public sector spending on health sector is partially progressive in

Pakistan. However, the share of the lower quintile is lower than higher quintile in

total public expenditures on health. Public sector expenditures in Preventive

Measures and Health Facilities sub-sector are progressive at provincial and regional

level, except in overall rural Pakistan. It means the public sector spending on

Preventive Measures and Health Facilities are more evenly distributed as compared

to the income distribution. Expenditure on Preventive Measures and Health

Facilities are highly subsidized by the federal government in Pakistan through its

vertical programmes. (Akram,2007)

Role of Private Sector

According to the PSLM (2004-05), as many as, 77 percent households consult the private

sector against only 23 percent to the public sector. In view of requirement businesses in

health are considered the most lucrative ones and there has been a mushroom growth of

private hospitals in urban and semi-urban centers. However, lack of effective regulations

has resulted into poor services in terms of quality as well as expenses. The government

perhaps cannot or do not want to impose restrictions on private enterprises in health sector

because of the need in the sector and also because of the realization that governments own

services are not up to the mark.

In view of the above it is difficult to accept that public expenditure in health are progressive

in Pakistan. In most South Asian countries, the ratio between private and public health

expenditures ranges from three to four. Therefore, the burden of financing of healthcare

falls disproportionately on households, especially the poor, in Pakistan.


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According to the HIES of 2004-05, expenditure on health by households ranged

from about 4 percent of total expenditure bythe lowest quintile to about 3.5 percent

for the highest quintile, averaging at Rs 345 per household per month. This implies

that the reported private expenditure on health was about Rs 92 billion. If allowanceis made for the underreporting of consumption expenditure (in relation to the

national income accounts) then the actual private expenditure on health could

approach Rs 180 billion. This is almost six times the level of public expenditure on

health. (SDPC;2007)

Absence of Health Insurance System

In Pakistan, Group Health Insurance was introduced some three decades back. The cost

incurred on the expenditure of health services for employees and individuals is posing

financial problems and government is in the process of introducing reforms. Health

insurance by private companies is one solution that may be promoted in order to deal withadministrative and financial issues associated with health care of employees. In view of the

facts explained above, individual health insurance has huge prospects in Pakistan but only

four insurance companies (PICIC, Adamjee, EFU,Askari) endeavored to step into this

business. Those companies also failed to reach out the people who are in dire need of health

care across the country. Non-tariff nature of business, lack of reliable data and lack of

support from the bureaucracy are some of the causes for losses in health insurance business

undertaken so far. However, it is believed that if local governments are encouraged to

introduce individual health insurance program in association with the private sector, people

will have improved access to better health services in a few years time. It will also be

advisable to look into the fact whether public health care schemes are an impediment in

promotion of private insurance programs or not. The answer to this question may help in

devising appropriate futuristic policy in the health sector.

Findings

The expenditure in health sector in Pakistan is not progressive. There is definite existence of inequalities in shares of different quintiles in health

expenditures.

Expenditures and efficiency at regional level is not in proportion to each other. Quality of health services in both public and private hospitals is because of absence

of an effective regulatory mechanism in health sector.

Rural areas that is home to 60% of the population and where majority is livingbelow the poverty line is the most affected in health services provided by the

government.


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Conclusion

A new health strategy outlining the equitable distribution of resources in health sector both

at horizontal and vertical level is required. Only a comprehensive and well directed plan

can ensure the disadvantaged groups and low income people access to medical services. Abetter policy focusing the income distribution factors and increasing subsidy to poor may

improve quality of life, provision of public goods and HDI in the country.

References

Akram,M(2007). Health Care Services in Pakistan. Pakistan Institute of DevelopmentEconomics Journal. No.32. PIDE, Islamabad.

Jahangir,F (2007). Government Spending in Health Care, International Islamic University,

Publication. Islamabad.

Economic Survey of Pakistan; 2010-11. Ministry of Finance, Government of Pakistan,Islamabad.

Health Systems Profile- Pakistan Regional Health Systems Observatory- EMRO,Islamabad.

Healthcare Expenditue in Pakisan

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