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Health Economics Financing &Expenditure : India&Expenditure : India
State Institute of Health and Family Welfare, Jaipury
“Health”Is a “product” ofIs a product of
“Health care”
2SIHFW: an ISO 9001: 2008 certified Institution
Health System Components
Resource Production
Programs Organization
Economical Support
Management Service delivery
g
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ChallengesChallenges
• Manpower- Number & Norms• Rural / Urban differential• Geographical divide across States• S-E groups –accessibility/ reach• Gaps between Policy & Action• Health sector expenditure
N I f i• Newer Infections
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Why Bring Economics to Healthy g• New emerging diseases, • Changing disease profile, • Technical and diagnostic advances, • Longevity of life, • Expectations of people, • Subsidies and cross-subsidies• Increasing non-plan expenditure,g p p• Competing priorities and • Improving awareness among people; p g g p p ;
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EconomicsEconomics is the Science which studies human behavior as a relationship between ENDS andbehavior as a relationship between ENDS and scarce MEANS which have alternative uses–Prof. Lionel Robbins–1932.Study how man and society end up choosing to employ the scarce resources that could have alternative usealternative use
Choice-Decision makingScarce resourcesAlternative use
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Health Economics• Health economics is the application of the
theories concepts and techniques oftheories, concepts and techniques of economics to the health sector.
• Study of How resources are allocated to and• Study of-How resources are allocated to and within Health sector
• AllocationAllocation• Quantity• Efficiency
• Production of Health care and its distribution across pop.
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Why Health Economicsy
• NO health care system has achieved level of spending sufficient to meet all its client need for Health careclient need for Health care.
• Resources are scarce
• What e “ ant” is nlimited• What we “want” is unlimited
• Therefore involves “choice”
M b fi /Mi Effi i• Max. benefits/Min. resources = Efficiency
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• Developed countriesHigher investment in health High Life expectancyHigher investment in health High Life expectancy
Increased Purchasing power parityIncreased Purchasing power parity
Developing countries• Developing countriesPoor investment in health low Life expectancy
Low Purchasing power parity
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Health Expenditure p
Public PrivatePublic Private
Out of PocketOut of Pocket80% of Health expenditure is
privateprivate (WHO,2004)
Profit Maximization
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Concept Of Health Economicsp
Health concept Economic concept1. Health Services
(a) Medical Care –(b) Public Health
• Cost
• Capital and Recurring Expenditure(b) Public Health
Services(c) Environmental
Expenditure
• Depreciation
• Health is an investment and 2. Medical Education,
Training and Research–The cost analysis of
not an expenditure.
yinstitutions involved inthese activities will addup to the cost ofup to the cost ofhealth.
Demand v/s Supply/ pp y
Demand for health care – influenced byDemand for health care influenced by• Medical care• Occupationp
• Consumption pattern• Education• Income• Costs
• Sex, marital status• Culture etc
Monetary V/s Non-monitory costs
Supply of Health Care – InfluencersSupply of Health Care Influencers
• Cost of delivery• Cost of delivery• Possibility of substitution ….
k f (d• Market for inputs (doctors, nurses, drugs, equipment etc.)
i• Remuneration
• How different remunerations affect behavior of suppliers of health care
Drivers of Health Cost
• Human Resource• Technology• Drugsg
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Health Care Markets• Externalities – communicable diseases• Asymmetric InformationAsymmetric Information• Uncertainty of Demand• Risk of death / impairment of full functioning p g• Product uncertainty –Quality?• Unique supply position –licensing, highly subsidized medical education social concern etcmedical education, social concern etc.
• Monopoly – to some extent • Need Govt. intervention –efficiency vs.equityNeed Govt. intervention efficiency vs.equity
Regulation, direct provision, Taxes/subsidies
Need Availability
Utilization
Felt need+
Affordability/
Access
EquityUtilizationAffordability/Resources
+
q y
Out-of-pocket
Willingness expenditure
Price ( fee d h )and charges)
Demand Supply
Types of Health Expenditure:
• Public goods-• Cannot be acquired by individuals (e.g.
Water and Sanitation program)• Are used by community• Are used by community
• Externality goods• Individuals can acquire (e g Immunization)Individuals can acquire (e.g. Immunization)• Individual use can benefit community
• Private goodsPrivate goods• Acquired by individuals (e.g. Private
Hospitals)• Used by individuals
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Some facts
• 1,392,954 Practitioners, 125000 in Govt., 59% in iticities
• 49% of beds, 42% of occupancy (private sector)• 40 Doctor/100000 32 Nurses/ 100000 pop• 40 Doctor/100000, 32 Nurses/ 100000 pop.
• (National average-59/ 100000, 79/100000)• Developed country average: 200/ 100000• Developed country average: 200/ 100000
• 76 drugs (25% of essential) under price control• 50% of spending in health is on drugs• 50% of spending in health is on drugs
Source: CBHI-10 & MCI
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• Health expenditure is 4.2, total (% of GDP)
• Proportion of Total Health Exp.: Govt-20%
• Private health exp.:
– 80% of total health cost80% of total health cost
– 97% : OOP
• One hospitalization: 60% of annual income
• Outpatient care accounts for 61 per cent of
private healthcare spendingp p gSource: CBHI & World Bank
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Wh ?Who pays?
• Health Authority?
G t?• Government?
• Taxpayer? p y
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Share in Health Care Spending source:CBHI,NHP-2010
27%27%
Private Expenditure
71%2%
p
External flow
Public Expenditure
Who really Pays?y y
Opportunity cost• Opportunity cost -if we choose to do one thing, the cost of doing that g, gis the value which would have been obtained from th b t lt ti h ithe best alternative choice
• Who pays - the person who d t i t t tdoes not receive treatment
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Health Expenditure as % of total Plan Outlay
6.5
6
7Outlay
Source: CBHI, NHP, 2010
4 09 3 97
5
6
3.43.1 2.9
3.2
3.9
3.12.8
3.1 3.1 2.9 2.93.2
4.09 3.97
3
4
2
0
1
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Total Govt. Expenditure on Health as % of GDPGDP
Source: CBHI, NHP, 2010
1 11.2
0 810.91
1.050.96
0.88 0.90.83 0.86
0.910.96 0.98
1.031.1
0 8
1
0 49
0.63 0.61
0.740.81
0.6
0.8
0.22
0.49
0.2
0.4
0
SIHFW: an ISO 9001: 2008 certified Institution
Per Capita Public Exp. on HealthSource: CBHI NHP 2010
184 56202.22
214.62
200
220
Source: CBHI, NHP, 2010
184.56 183.56
140
160
180
200
112.21
100
120
140
19 37
38.63
64.83
40
60
80
0.61 1.36 2.48 3.47 6.22 11.1519.37
0
20
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Status of Expenditure in FYPsSource: CBHI, NHP, 2010
FYPsTotal Plan
Investment HealthFamily Welfare
I 1960 65 2 0 1I 1960 65.2 0.1II 4672 140.8 2.2III 8576 225 24 9III 8576 225 24.9IV 15778.8 335.5 284.4V 39322 682 497.4VI 97500 1821 1010VII 180000 3392 3256.2VIII 798000 7575 9 6500VIII 798000 7575.9 6500IX 859200 10818 15120.2X 1484131 3 31020 3 27125X 1484131.3 31020.3 27125XI 2156571 136147.0
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Total Outlay – Plan and Health (including AYUSH & FW)AYUSH & FW) Source: CBHI, NHP, 2010 Total plan outlay
Heath sector
120000
140000
160000
2000000
2500000
80000
100000
120000
1500000
40000
60000
800001000000
0
20000
40000
0
500000
I II II IV V VI VII VIII IX X XI
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7% of total budget allocated to health
So rce CBHI NHP 20106.49
6
7 Source: CBHI, NHP, 2010
3 34
5
3.33
2.62 1 1 9
2.313
2.1 1.9 1.8 1.71.7
3.97
1
2
0I II II IV V VI VII VIII IX X XI
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Expenditure PatternsExpenditure Patterns
• Public expenditures –declining trends
• Out of pocket – increasing burden, especially the poor and in rural , p y pareas
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Health Spending: Facts• Public Domain
– Center: Rs 35 bi (0 13% GDP)– Center: Rs.35 bi (0.13% GDP)– State: Rs.186 bi (0.72% GDP)
Local: Rs 25 bi estimated (0 10% GDP)– Local: Rs.25 bi estimated (0.10% GDP) – Social Insurance: Rs. 12 bi (0.05% GDP)
Private Domain• Private Domain– Out-of-pocket: Rs.1200 bi (4.62% GDP)
I ( bli t ) R 8 bi (0 03%– Insurance (public sector) Rs.8 bi (0.03% GDP)Pharma Industry Rs 250 bi (0 96% GDP)– Pharma Industry Rs. 250 bi (0.96% GDP)
30SIHFW: an ISO 9001: 2008 certified Institution
Budget Rajasthang j
2.07
140000160000
230.
7
14
1477
6
80000100000120000140000
6287
0.95 10
2 2
8717
1.
n la
khs
400006000080000
7.21
3.99
4.53
775.
6836
.79
9493
.06
2022
8.12
6
Am
ount
i
020000
1 2 3 4 5 6 7 8 9 10 11
16 38 66 17 333 9
Five Year plans
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Health Financing
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Issues in Health Financing:
Red ce o t of pocket pa ments• Reduce out-of-pocket payments• Increase the accountability towards
health care provisionhealth care provision• Risk pooling & Risk sharing.
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Key Issues in Health Financingy g• What is total spending on health
Wh i di it• Who is spending it • What it is being spent on • What are the sources of this exp.• What are the main trends• How efficiently funds are allocated and spent• What can be done to improve Health financing
• Increase kitty • Increase allocative efficiency
34SIHFW: an ISO 9001: 2008 certified Institution
National Health SpendingUses Central
Govt.State & Local Govt.
Corporate/3rd Party
Households Total
Govt.Primary Care•Curative•Preventive
4.3
0 4
5.6
3 0
0.8
0 8
48.0
45 6
58.7
49 7Preventive• PromotiveCare
0.44.0
3.02.7
0.80.0
45.62.4
49.79.0
Secondary/ 0 9 8 4 2 5 27 0 38 8Secondary/Tertiary in Patient Care
0.9 8.4 2.5 27.0 38.8
Non Service Provision
0.9 1.6 NA NA 2.5
T t l 6 1 15 6 3 3 75 0 100 0Total 6.1 15.6 3.3 75.0 100.0
Source: World Bank, 1995.35SIHFW: an ISO 9001: 2008 certified Institution
Recommendations
Plan allocations & % of GDP• Alma-Ata-5%• CSSR-ICMR-6% (1982)( )• CCHFW (1989)-7% of Plan; actual for 1990 was
only 1.3% of GDP• CCHFW (2001) suggested 2% of GDP from the
then current level of 0.9%
36SIHFW: an ISO 9001: 2008 certified Institution
1377
Health Care Spending (2004-05)
1200
1400
India
800
1000 808Rajasthan
400
600
200
400
73.5 22 4.570 24.5 5.5
0Per capita
expenditureHousehold Public Other
Source: NCMH, 2005
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2500
2000
2500
1700
Out of pocket expenditure on Health (2004-05)
15001500
1000
1700
500
1000 800 750550 550
1000 900
0
500
Based on NHA-2000-01, extrapolated for 2004-05
38SIHFW: an ISO 9001: 2008 certified Institution
What it is being spent onCurative49.7 %
Preventive9.0%
Primary Care
58.7%
38.8%• Secondary• Tertiary
2.5%Non Service ProvisionsTertiary Non Service Provisions
39SIHFW: an ISO 9001: 2008 certified Institution
R l f H lth E iRole of Health Economics
Choice-Decision makingChoice-Decision makingScarce resourcesAlternative useAlternative use
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Choosing-Decision making• Allocative efficiency
• Where to park the resources• Where to park the resources • What discipline to develop (Priority)
• Market researchMarket research• Investment cost
» Human resource availabilityy» Technology & outrage
• Expected Return» Purchasing power» Service utilization» Marketability» Marketability» Competition
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Rationing of Health Careg
• Economics concerned with choice betweenEconomics concerned with choice between competing alternatives
• Based on axiom of scarcity - resources limited yrelative to wants
• Fundamental ‘economic problem’ is therefore pallocation of these scarce resources
• ‘Rationing’ (priority-setting) just another term for resource allocation
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Scarcity y
NeedDemands
Desire
Resources
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Basis of Rationingg
Price system - objective = efficiencyPrice system objective efficiencyconsumer sovereignty
Non price objective efficiency or equity’?Non-price - objective efficiency or equity ?who decides on allocation?allocation by what criteria?allocation by what criteria?
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Alternative Use
Opportunity cost: pp ypossibility of alternative useof moneyof money
Are the benefits from “chosen” greater thanthose “forgone”those forgone
• Burden of disease• Prevalence• Prevalence• Visible impact• Cost benefit• Cost- benefit
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One IVF course = INR 85000What is the opportunity cost?
One-third of a
1 heart bypass operation
O e t d o acochlear implant
operation
150 vaccinations for Measles,
11 cataract removals
Mumps and Rubella
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Medical Care and Utility
•Medical care is an input in producing health•Subject to law of diminishing marginal productivityj g g p y
• Health yields utility to the consumer• Health yields utility to the consumer• Subject to law of diminishing marginal utility
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Economics Seek an Answer
• What influences health? (other than health care) ( )• What is health and what is its value • The demand for health care • The supply of health care • Micro-economic evaluation at treatment levelMicro economic evaluation at treatment level • Market equilibrium• Evaluation at whole system level; and, y ; ,• Planning, Budgeting and monitoring
mechanisms.
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Cost of Care:P i t / P bliPrivate v/s Public
• Direct-• Medicine
• Indirect-• commuting• Medicine,
• consumablesIntangible
• commuting, • wage loss,
social cost• Intangible-• pain,
l t
• social cost,• Fee for facilitation
L d i & B di• neglect, • Lodging & Boarding • subsidy
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Estimating Demand for Medical CareCare
• Quantity demanded • Out-of-pocket price• Real income• Time costs• Prices of substitutes and complements• Tastes and preferences• Profile• State of health• Quality of carey
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What Dictates Private Sector
• Capital & recurring costp g• Payment schemes• TechnologyTechnology• Cost of Training• Public expectationsPublic expectations• Regulatory mechanism
• Taxes• Taxes• Regulations
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What Health Economics Should M t P f iMean to Profession
• Matching inputs to outputs and outcomesI i Effi i• Increasing Efficiency
• Technical (output with minimum )resources)
• Allocative (produce output which people value mostvalue most
• Cost effectiveness(output at least cost)
52SIHFW: an ISO 9001: 2008 certified Institution
Taking Care of Cost: What To Do g
• Ensure stable financing mechanism• Enhance financial protection and social safety p y
nets. • Achieve more resource allocation and
t di t ff ti h lthgovernment spending on cost effective health interventions
• Improve institutional capacity and capability in• Improve institutional capacity and capability in budgeting, pricing, financial planning and management
53SIHFW: an ISO 9001: 2008 certified Institution
Sources of Financingg
• Taxation, • Health insuranceHealth insurance, • Private payments –Out of Pocket
expenditure (OoPE)expenditure (OoPE)• And external support(Donor agencies-
Grants/ Loans)G a ts/ oa s)
54SIHFW: an ISO 9001: 2008 certified Institution
Which Source
• People’s capacity to pay, • Administrative capacities to collectAdministrative capacities to collect, • The Nature and quality of services , and
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• Need for User charges-1 Too many to use the public1. Too many to use the public
services2 Li it d2. Limited resources3. Increasing demand4 Hi h i4. High recurring cost
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Why User Charges?y g
• People misuse just because it is “Free”• Revenue generated can improve quality• Marginal sections can be better looked
after (Cross subsidy)• System can be made self sustainable to• System can be made self sustainable to
a large extent• Payment increase sense of ownership &Payment increase sense of ownership &
Participation
57SIHFW: an ISO 9001: 2008 certified Institution
• Mechanism for introducing User charges-
• Dual pricing• Graded charges• Exemption criteria• Exemption criteria
• What determines User Charges?• Cost of care• Cost of care• Cross subsidy costs• Replacement cost including inflation and p g
rupee devaluation
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• Some more approaches for Financing• Some more approaches for Financing Health care are-
Introduction of User fee with cross»Introduction of User fee with cross subsidy
»Public Private Mix using spare»Public Private Mix using spare capacity
»Introducing Sub-contracting &»Introducing Sub-contracting & leasing
»Build Opertate Transfer/ Own»Build, Opertate,Transfer/ Own»Expanding revenue base ( more
services brought under fee)services brought under fee)
59SIHFW: an ISO 9001: 2008 certified Institution
Tools for Health Care Financingg
• Health InsuranceHealth Insurance• Regulation and Legislation• National Health AccountsNational Health Accounts• Resource allocation (Allocative efficiency)• Cost benefit and cost effectiveness analysis• Cost benefit and cost effectiveness analysis• PPP• RMRS• RMRS
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Rajasthan Medical Relief Society• NGO-Registered society-Autonomy• Self-sustainableSelf sustainable• Reducing cost of care –No middle man• Instrument for cost recovery (user fee)Instrument for cost recovery (user fee)• Cross subsidy to marginalized• Promote PPP for capital intensive facilities in• Promote PPP for capital intensive facilities in
Health care• Structure(9-11 members)Structure(9 11 members)
– PHS/Commissioner/Collector, Supdt./PMO/CMHO/BCMO, Doctors (2-HO/BCMO, Doctors (23), PRI(2), Citizens(3), NGO, Associate /Institutional memberSIHFW: an ISO 9001: 2008 certified Institution 61
RMRS: Progress
Expenditure RMRS Beneficiaries
RMRS: 53 Hospitals, 368 CHCs & 1504 PHCs
249417592009-10(Dec.)
Expenditure
6677032009-10(Dec.)
RMRS Beneficiaries
824570102008-09 5750132008-09
27217655
53801066
2006-07
2007-08
944431
631249
2006-07
2007-08
64831821
0 50000000 10000000
2005-06 1667639
0 500000 100000015000002000000
2005-06
0 50000000 10000000 0 500000 100000015000002000000
SIHFW: an ISO 9001: 2008 certified Institution 62
Thank YouThank You
For more details log on towww. sihfwrajasthan.com
oror contact : Director-SIHFW
on
sihfwraj@yahoo.co.in
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