Healthy reduction – Out-of-pocket health spends must fall faster

Source: The post is based on the article “Healthy reduction – Out-of-pocket health spends must fall faster” published in the Business Standard on 27th April 2023.

Syllabus: GS-2: Issues relating to development and management of Social Sector/Services relating to Health.

Relevance: About National Health Accounts report and its findings.

News: The latest data from the National Health Accounts for 2019-20 suggests that India is witnessing a steady fall in the average out-of-pocket expenditure (OOPE), or the amount patients spend themselves directly at the point of treatment.

What are the key findings of the National Health Accounts report?

-From a high of 62.6% in 2014-15, OOPE fell to 47% in 2019-20.

-In the same period, government health expenditure rose from 29 to 41% of total healthcare expenditure.

-Private health insurance appears to have grown in this period, from 3.7 to 7%. Over a five-year timeline, this is a development in the right direction.

What are the key observations of the National Health Accounts report findings?

There is a strong correlation between rising government health expenditure and falling OOPE. For example, the years between 2016-17 and 2017-18 saw an almost 10 percentage point drop in OOPE, in tune with an 8 percentage point rise in government expenditure.

Although the Ayushman Bharat scheme was introduced in the 2018-19 fiscal year, its impact on OOPE is yet to be determined.

What are the concerns associated with the National Health Accounts report?

a) The report figures pertain to the year before the outbreak of the Covid-19 pandemic. So, it is reasonable to assume that much has changed in the three years, given the nature of the virus, b) Although the OOPE has reduced, Indians still spend far too much from their own pockets to pay health expenses. For example, OOPEs as a percentage of total healthcare expenditure for countries such as Indonesia, China and Malaysia were around mid-30s, c) Central and state governments still underspend on healthcare. Government health expenditure as a percentage of GDP between 2014-15 and 2019-20 rose only marginally, from 1.13% to 1.35%.  Bur the per capita spend nearly doubled from ~1,108 to ~2,014.

What should be done to reduce OOPEs further?

The aim is to raise health expenditure to 2.5% of GDP by 2025, and the Central government has stayed on this path despite fiscal constraints. As of now, state spending is just 4-5% of their total budget. An increase in allocation by states would help in making an appreciable difference to OOPEs.