Patterns of Public Health Expenditures in India : Analysis of State and Central Health

Budgets in pre and post-NRHM period

Gautam Chakraborty (Advisor – Healthcare Financing)Arun B Nair (Consultant – Health Economist)National Health Systems Resource Centre (NHSRC)National Rural Health Mission (NRHM)Ministry of Health & Family WelfareGovernment of India

Public Financing of Health: Goals…

• National Health Policy (2002)– Increase Health Expenditure by Govt. as % of GDP from

the existing 0.9% to 2.0% by 2010.– Increase share of Central grants to constitute at least

25% of total health spending by 2010.– Increase State Sector Health spending from 5.5% to 7%

of the budget by 2005 (and further increase to 8% by 2010).

• National Rural Health Mission (2005)– “…Government to raise public spending on Health from

0.9% of GDP to 2-3% of GDP.”– “The States are expected to raise their contribution to

Public Health Budget by minimum 10% p.a. …”

2

Structure of Health Budget

3

PLAN

NON PLAN

CENTRALLYSPONSOREDSCHEMES

StateFunds

EXTERNALLYAIDEDPROJECTS

REV

EN

UE

EX

PEN

DIT

UR

E

CA

PIT

AL

EX

PEN

DIT

UR

E

LO

AN

AC

CO

UN

TEX

PEN

DIT

UR

E“SOCIETY” ROUTE

(NRHM & RCH-II Flexi-pools; NACP-III)

22102211

42104211

62106211

“TR

EA

SU

RY

” R

OU

TE

• Line-item budget (lack of flexibility)• “Doctrine of Lapse”• DDO (limits of financial powers)• Separation of Expenditure with Authorization &

Payment

11/30/2010NHSRC (Gautam Chakraborty)

4

Treasury Route: Challenges

• Off-budget transactions (issue of accountability and transparency)

• Merger of Expenditure with Authorization & Payment

This needs:• Accountability – more active participation of non-

government members in the “Society”• Transparency – Concurrent Audits, FMRs in public

domain (along with HMIS)

11/30/2010NHSRC (Gautam Chakraborty)

5

Society Route

Inter-State Analysis of Health Budget

Central Health Budget

State Health Budget

Growth Rates of State Health Expenditure

Growth Rate of State Budget Expenditure

YEAR 2000-01 TO 2007-08 2000-01 TO 2004-05 2005-06 TO 2007-08

Andhra Pradesh 7.8 2.4 14.2Assam 15.2 3.4 35.6Bihar 3.6 -9.2 9.1Chhattisgarh 26.3 27.7 22.3Gujarat 4.5 1.1 7.1Haryana 8.5 5.5 7.8Jharkhand 12.5 3.1 -0.3Karnataka 8.0 0.8 16.9Kerala 9.3 5.8 12.5Madhya Pradesh 5.3 0.8 9.6Maharashtra 7.6 3.9 10.1Orissa 8.1 6.4 20.9Punjab 3.7 -1.0 6.8Rajasthan 7.1 3.6 9.3Tamil Nadu 7.1 2.6 8.3Uttar Pradesh 14.5 8.7 13.8West Bengal 4.2 -1.2 9.5All States 8.4 3.9 12.0

Growth Rate of Capital Expenditure YEAR 2000-01 TO 2007-08 2000-01 TO 2004-05 2005-06 TO 2007-08

Andhra Pradesh 2.4 -23.0 76.8Assam -15.1 5.7 -48.1Bihar 3.2 12.0 -1.2Chhattisgarh 53.1 58.7 43.9Goa 19.6 11.5 7.7Gujarat 14.9 1.0 38.1Haryana 23.8 8.8 33.8Jharkhand 35.1 23.9 42.6Karnataka 10.7 11.8 -12.9Kerala 20.6 7.3 29.0Madhya Pradesh 20.6 7.3 29.0Maharashtra 11.3 17.5 2.0Orissa -0.3 -40.3 14.3Punjab 34.8 15.8 87.8Rajasthan 17.2 3.1 14.1Tamil Nadu 24.2 11.5 -9.2Uttar Pradesh 39.8 29.9 30.6West Bengal 2.5 -14.2 22.7All States 20.6 9.2 26.4

Utilization of State Health Budgets - Revenue Budget for All States

Budgetary Allocation Expenditure Expenditure against BEYear Plan Non-Plan Total Plan Non-Plan Total Plan Non-Plan Total2001-02 580734 1158995 1739729 569354 1021032 1590386 98.0 88.1 91.42002-03 574250 1229544 1803794 445706 1188433 1634138 77.6 96.7 90.62003-04 612482 1277234 1889716 476471 1240646 1717116 77.8 97.1 90.92004-05 615964 1352247 1968210 520495 1325118 1845613 84.5 98.0 93.82005-06 711486 1544442 2256076 531541 1499013 2030554 74.7 97.1 90.02006-07 748863 1828648 2577512 574739 1645766 2220505 76.7 90.0 86.12007-08 752725 2012141 2764866 758091 2017951 2776043 100.7 100.3 100.4

                   Utilization of State Health Budgets - Capital Budget for All States

Year

Budgetary Allocation Expenditure Expenditure against BEPlan Non-Plan Total Plan Non-Plan Total Plan Non-Plan Total

2001-02 176974 522 177496 70318 1976 72294 39.7 378.5 40.72002-03 98994 465 99459 74822 399 75221 75.6 85.8 75.62003-04 123594 205 123799 106125 291 106416 85.9 142.0 86.02004-05 127745 828 128573 113309 2763 116072 88.7 333.7 90.32005-06 209499 1386 210884 172169 398 172567 82.2 28.7 81.82006-07 316819 2675 319494 314906 2061 316967 99.4 77.0 99.22007-08 360648 2785 363433 377910 2738 380648 104.8 98.3 104.7

Fund Flow under NRHM

Expenditure Under NRHM

Fund Flow under RCH Flexi Pool

Fund Flow under Mission Flexi-pool

Peculiar problem under Mission Flexi-pool

• Complete grant under Mission Flexible Pool is treated as Recurring Grant (for which UC is due immediately after close of FY). This does not take into cognizance:– 7 tier structure of fund flow: Centre State

District Block (CHC) PHC Sub-Centre VHSC.– Annual committed grants (Untied Grants, AMG &

Corpus Grants to RKS) to VHSC, SC, PHC, CHC & Distt. Hospitals which are to be used over the whole year.

– Civil work component under which funds are advanced to PWD, etc..

– Procurement component under which funds are advanced to procurement agencies.

Bottle-necks in absorbing funds

• High expenditure cycle (civil works, procurement)• Lack of preparation for expenditure (trainings, social

protection schemes)• Average advances outstanding• Average cash reserves• Limits in financial decentralization• Skills of book keeping and accounting• Penetration of banking and e-commerce

Public Health Financing: the way forward

• Shift from line-item budgeting to block budgeting/grants, especially at facility level

• Creating 2 channels of funding – (i) for items with expenditure cycle below 1-month, (ii) for items with expenditure cycle 3-months and above

• “Purchasing” of care even within public health system• Differential Financing (by levels, facilities, patients / beneficiaries)• Creation of “District Health Funds” for innovations and other

needs• Shifting focus of audits from “compliance to guidelines” to

transparency and accountability

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