Healthy reduction

Out-of-pocket health spends must fall faster

One of the relatively healthy developments in Indian healthcare in recent years has been the steady fall in the average out-of-pocket expenditure (OOPE), or the amount patients spend themselves directly at the point of treatment, as a percentage of total healthcare expenditure. The latest data from the National Health Accounts for 2019-20 suggests that India has continued on this trajectory. From a high of 62.6 per cent in 2014-15, OOPE fell to 47 per cent in 2019-20. In the same period, government health expenditure rose from 29 to 41 per cent of total healthcare expenditure. Private health insurance also appears to have grown in this period, from 3.7 to 7 per cent. Over a five-year timeline, this is a development in the right direction.

A closer look at the long-term trends since 2013-14 suggests a strong correlation between rising government health expenditure and falling OOPE. The years between 2016-17 and 2017-18, for instance, saw an almost 10 percentage point drop in OOPE, in tune with an 8 percentage point rise in government expenditure. Although the signature Ayushman Bharat scheme was introduced in the 2018-19 fiscal year, and its impact on OOPE is yet to be determined, the broader message remains that higher government expenditure across the board can make a difference. The latest data, however, needs to be treated with caution. For one, these figures pertain to the year before the outbreak of the Covid-19 pandemic. It is reasonable to assume that much would have changed in the three years since, given the nature of the virus and its after-effects. The data for these years would probably offer better visibility into the durability and efficiency of government spending in the healthcare sector. Second, although the government can claim kudos for the steady fall in OOPE, the fact is that Indians still spend far too much from their own pockets to defray health expenses. Stories of families being ruined by spending on major illnesses are too frequent to be ignored. For comparison, OOPEs as a percentage of total healthcare expenditure for countries such as Indonesia and Malaysia hover in the mid-30s, which is approximately the same as in China.

This reality is a reflection of the fact that both the Central and state governments still underspend on healthcare. Government health expenditure as a percentage of gross domestic product (GDP) between 2014-15 and 2019-20 rose only marginally, from 1.13 per cent to 1.35 per cent, though the per capita spend nearly doubled from Rs 1,108 to Rs 2,014. The aim is to raise health expenditure to 2.5 per cent of GDP by 2025, and the government has stayed on this path despite fiscal constraints. In 2019-20, government healthcare expenditure increased by 12 per cent over the previous year, a jump ahead of the rise in total healthcare expenditure by 10 per cent. Much of this, however, came on the back of heavy lifting by the Centre. The states, too, must pitch in. As of now, state spending is just 4-5 per cent of their total budget. An increase in allocation by states would help in making an appreciable difference to OOPE.