rural healthcare financing management paper

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A STUDY ON FINANCING OF RURAL HEALTHCARE IN INDIA

N. srinu1

Introduction

Since India's independence in 1947, improvement in the health status of the population

by raising the access to and utilisation of health, family welfare and nutrition services,

has remained one of the major thrusts for social development. Over the last five decades,

India has created a vast healthcare infrastructure and manpower, which has been

considerably modernised, and helped in reducing mortality and improving life

expectancy. However, India despite being a signatory to the Alma Ata declaration of

1978, which aimed at achieving 'Health for All' by 2000, is still lagging behind from

realising this dream, even in 2003. Issues related to accessibility, efficiency, and quality

of the health delivery continue to haunt the policy makers. There are huge gaps in the

placement of critical manpower in primary healthcare institutions with wide inter-state

and intrastate variations in rural and urban settings. The overall health system continues

to function inefficiently and poorly partly due to mismatch between personnel and

infrastructure, lack of skill up-grading and orientation programmes, absence of well

established linkages between different system components, and lack of an appropriate

functional referral system. Structural changes are taking place in the health sector at a

time when the world economy is also changing rapidly with globalisation policies

becoming deep rooted and widespread, challenging the established development

paradigms. As envisaged in the initial years of independence that the provision of basic

public health services would be provided free of cost is no longer appreciated particularly

since the early 1990s. Due to squeezed budgetary support and growing fiscal crisis, both

the Centre and most of the state governments in India are finding it difficult to cater to

the changing health needs of the growing population. This has forced the governments to

look for alternative options. The country is also passing through a health transition

causing changes in disease pattern load. The global trend towards increasing share of 'for

profit' healthcare and its marketisation through an increasing influence of multinational

corporations across societies is not only intense, but stands firmly consolidated. Changes

affecting the demand and supply sides because of technological advances and

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improvements in access to healthcare technologies, increasing awareness and

expectations of the people, have been equally important and cannot be ignored. Efficient

and effective health care is determined by the way the financing of health care systems is

structured and organised. The health financing system in India is dependent on

government budgetary allocations and private financing. The role of private financing has

increased significantly in recent years. It is estimated that people spend about 4.5% of the

GDP on healthcare needs and this is about three fourths of the health care expenditure

(World Bank, 1998). Most of it is out-of pocket private expenditure, which has grown

at the rate of 12.5%, and for each 1% increase in the per capita income it has increased by

about 1.44%. In the absence of effective regulation of private health services, health care

costs are inevitably high, and it is people belonging to the lower income classes who

suffer the most. In recent times, health care has become almost unaffordable and has

given rise to serious equity issues. Hence it is imperative that we find alternative health

financing mechanisms. The NRHM seeks to provide universal access to equitable,

affordable and quality health care which is accountable at the same time responsive to the

needs of the people, reduction of child and maternal deaths as well as population

stabilization, gender and demographic balance.

Rural Health Care System in India

Rural Health Care System the structure and current scenario. The health care

infrastructure in rural areas has been developed as a three tier system and is based on the

following population norms:

Centre Plain Area Hilly/Tribal/Difficult Area

Sub centre 5000 3000

PHCs 30000 20000

CHCs 120000 80000

Sub-Centres (SCs)

The Sub-Centre is the most peripheral and first contact point between the primary health

care system and the community. Each Sub-Centre is manned by one Auxiliary Nurse

Midwife (ANM) and one Male Health Worker/ MPW (M) (for details of staffing

pattern,). One Lady Health Worker (LHV) is entrusted with the task of supervision of six

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Sub-Centres. Sub- Centres are assigned tasks relating to interpersonal communication in

order to bring about behavioral change and provide services in relation to maternal and

child health, family welfare, nutrition, immunization, diarrhea control and control of

communicable diseases programmes. The Sub-Centres are provided with basic drugs for

minor ailments needed for taking care of essential health needs of men, women and

children. The Ministry of Health & Family Welfare is providing 100% Central assistance

to all the Sub-Centres in the country since April 2002 in the form of salary of ANMs and

LHVs, rent at the rate of Rs. 3000/- per annum and contingency at the rate of Rs. 3200/-

per annum, in addition to drugs and equipment kits. The salary of the Male Worker is

borne by the State Governments. Under the Swap Scheme, the Government of India has

taken over an additional 39,554 Sub Centres from State Governments / Union Territories

since April, 2002 in lieu of 5,434 number of Rural Family Welfare Centres transferred to

the State Governments / Union Territories. There are 1, 45,272 Sub Centres functioning

in the country as on March 2007.

Primary Health Centres (PHCs)

PHC is the first contact point between village community and the Medical Officer. The

PHCs were envisaged to provide an integrated curative and preventive health care to the

rural population with emphasis on preventive and promotive aspects of health care. The

PHCs are established and maintained by the State Governments under the Minimum

Needs Programme (MNP)/ Basic Minimum Services Programme (BMS). At present, a

PHC is manned by a Medical Officer supported by 14 paramedical and other staff. It acts

as a referral unit for 6 Sub Centres. It has 4 - 6 beds for patients. The activities of PHC

involve curative, preventive, primitive and Family Welfare Services. There are 22,370

PHCs functioning as on March 2007 in the country.

Community Health Centres (CHCs)

CHCs are being established and maintained by the State Government under MNP/BMS

programme. It is manned by four medical specialists i.e. Surgeon, Physician,

Gynecologist and Pediatrician supported by 21 paramedical and other staff. It has 30 in-

door beds with one OT, Xray, Labour Room and Laboratory facilities. It serves as a

referral centre for 4 PHCs and also provides facilities for obstetric care and specialist

consultations. As on March, 2007, there are 4,045 CHCs functioning in the country.

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Healthcare development in india

The aim of health financing is to raise sufficient funds and create suitable financial

Incentives so that everyone has access to disease-prevention and the necessary health

care. Proper financing makes it possible to reduce or eliminate the risk of an individual ora household being faced with serious financial difficulties or becoming impoverished due

to having to pay for health care. In the Indian federal set-up with given centre state fiscal

arrangements, the health sector, though a state subject, is jointly managed by the centre as

well as by states. There is a clear demarcation between central and state healthcare

provisioning and financing of various health services. States fully finance hospital

services, primary healthcare facilities. On an average, out of the total government

healthcare spending, the states' share is found above 85 %. The central government while

fully financing the family welfare programmes, finances the national disease control

programmes on a 50:50 basis. The states' share, in fact, rises to about three-fourths as the

state has to bear all the administrative costs including salaries of the staff. Centre and

states share the capital investment equally. Out of the total expenditure on medical

education, research and training, Central government's share is little over 40%. In this

backdrop, it is important to have a quick review of India's healthcare financing situation

in the national and international perspectives. As illustrated by the following points, it is

not very encouraging:

1). The Indian healthcare spending in sharp contrast to a number of other Southeast

Asian countries as regards spending on preventive and promotive care is far less. India

spends only one-third on preventive and promotive healthcare, whereas this proportion is

as high as two-thirds in China and Sri Lanka. Preventive and promotive healthcare

services include: immunisation, antenatal, maternity and postnatal care, contraceptives

and other family planning measures; community based services such as spraying for

malaria, and health education.

2). The spending on primary health care is not only far less, but it is lopsided, too. Out of

the total curative care spending, nearly three-fourths is spent on secondary and tertiary

hospitals--primarily located in urban areas. Given that 70 % of population resides in rural

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areas, the government spends too little on the day-to-day healthcare needs of the rural

Indians. This pattern needs to be reversed.

3). Budgetary allocations at the state level are deplorably low with glaring inter-state

differentials. Also, the composition of health expenditures is such that a major chunk is

spent to meet the recurrent costs of public healthcare delivery system (about 70% of the

total health budget goes for salaries and wages alone).

4). Interrelationships among income (per capita state domestic product), health

expenditure (per capita state health expenditure) and the health status of the population

are strong. The richer states spend higher amounts on healthcare, resulting in raising the

health status of people. On the other hand, the low income states lag behind in improving

the health status of their people as they have neither adequate resources nor could raise

the matching funds for implementation of several centrally sponsored and executed

public health programmes.

5). Indian states the finding of the World Bank cross-country analysis that as countries

get richer, they tend to spend more of their incomes on healthcare, and the government's

share grows larger (World Bank, 1993). In India, in spite of the fact that economy has

grown at around 6 % during the post-reform period (since 1991-92), the government

health spending (in per capita real terms, as percentage of GDP and in relation to other

sectors) has actually declined in the initial years of reforms. This clearly reflects that

health is yet to receive priority in the national resource allocations.

Emerging healthcare financing patterns

The dwindling public health spending and rising requirements to meet dual healthcare

needs--the rising secondary and tertiary curative and super speciality levels and

expanding provision of primary services in the remote areas--are compelling many states

to explore new routes of healthcare financing. The different methods suggested include:

introduction of user fees, public private partnership including the voluntary sector

(NGOs), dual pricing system, increase in the registration fee, effective regulation of

private sector and achieving cost effectiveness through better planning at all levels in the

healthcare system. Among all these aspects, public private partnership (PPP) has assumed

greatest importance. Though the nature and extent of PPP differs a lot across the board,

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its justification is sought on three grounds--better distribution of the financial burden,

improvement in the quality and quantity of healthcare services, and strengthening the

capacity of the private sector. Some successful PPP models which are being practiced in

different states of India are: subsidised infrastructure to open super specialised hospitals;

handing over the management of primary health centre to NGOs; involving industry to

adopt local primary health centres or sub-centres; involving industrial corporate houses to

adopt villages for health improvement; and encouraging and mobilising patients to

organise themselves into health action associations or NGOs (Kumar, 2003). However,

an overall policy-design of many of these aspects relating to PPP is still not clear. It is

quite clear from the above discution that given India's federal framework, the healthcare

provision and financing, evaluated in terms of the relative shares of public and private

household spending, and budgetary allocations made over the period both by the centre

and states is far from satisfactory to address the needs of the poorest sections of the

society. Even the user charges introduced in response to the market oriented deregulation

policies have not helped in revenue mobilisation as the cost recovery in number of states

continues to be insignificant--not more than 2 % to the hospital budget. In order to

understand the future implications of the globalisation process, which is becoming deep

rooted in the Indian economy, particularly given the discouraging healthcare financing

scene, it is important to bring out how the available healthcare system is being used.

Health care financing by government

Current health expenditure in India is estimated to be around Rs. 1030 billion. India

Spends 6 per cent of GDP on health. The share of government is less than 2 per cent

(Tulasidhar 2000). The World Health Organisation has recommended that governments

must spend at least 5 per cent of GDP on the health sector. Bulk of health care spending

is direct out-of-pocket household expenditure.

National health spending: sources and uses (per cent)

Central govt State and localgovt

Corporate thirdparty

House holds outof pocket

PHCs 4.3 5.6 0.8 48

S and Tinpatient care

0.9 8.4 2.5 27

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Non serviceprovision

0.9 1.6 Nill Nill

Total 6.1 15.6 3.3 75

Source: world Bank reports (2000)

Though the demand for health care is increasing owing to population pressure, the

Government is finding it very difficult to maintain its health facilities. Government

allocations are also showing a declining trend over the years Government allocations in

the health sector have declined from 1.3 per cent of GDP In 1990 to 0.9 per cent in 1999

(National Health Policy, 2001). The central Government plays an important role in

supporting national health programmes such as Malaria, TB, etc. Funds for these

programmes are channelled through state governments. These schemes give priority to

primary health care whereas state governments bear the major responsibility of recurrent

costs, especially the cost of operating the hospitals. The significance of alternative

sources of financing has increased significantly. There are four major alternatives for

mobilising resources other than government funds. Community financing: Individuals,

families, or community groups make voluntary Contributions towards meeting healthcare

costs. The cost is shared among members Regardless of individual use. This works out

well for small groups. User fee: This is fee paid for services or out-of-pocket expenses

from users. This helps in improving revenue and rationalises the utilisation in

government systems. However, fee-for service in the unregulated health sector has manyperverse incentives.

Even though public sector spending accounts for less than a quarter of the total

health spending in India, it has a major role in terms of planning, regulating and shaping

the delivery of health services. Such public provisioning is considered essential to

achieve equity and to address the large positive externalities associated with health. As a

result, a vast and widespread public health system grew over time across the country;

there were 137,311 sub-centres, 22,842 PHCs, 3043 CHCs, 4048 hospitals and a

workforce of 345,514 in 2001-02. The way in which the sector is financed determines the

effectiveness of service delivery and requires an understanding of the financing

mechanisms in this sector. Health being a State subject, the sector is financed primarily

by the State Governments. The per capita total health spending was estimated to be

around US$23 during 1997- 2000 (World Bank 2003). As compared to the levels of

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spending by countries such as Sri Lanka (US$31) and Thailand (US$71), the spending in

India is substantially low. A breakdown of health expenditure reveals that expenditure by

the public sector in these countries is twice that of India. Substantially higher levels of

health outcomes in these countries as compared to India clearly indicate that there is a

strong case to markedly increase public sector spending on health, as stated in the

National Health Policy 2002 and the National Common Minimum Programme (CMP)

2004. The primary source of public financing is the general tax and non-tax revenues.

These include grants and loans received from both internal and external agencies, which

face competing demands from various ministries and departments. This pool of resources

is used to finance the Centres and States own programmes. The Central Government

plays a catalytic role in aligning the States health programmes to meet certain national

health goals through various policy guidelines as well as financing certain critical

components of centrally sponsored programmes implemented by the State Governments.

In addition to tax revenues, a meager amount is also raised through user charges, fees

and fines from the sector, and further supplemented through grants and loans received

from external sources. In the case of local governments, the respective State

Governments largely finance their health programmes. Local governments do raise

resources through user charges and certain fees though the quantum varies widely from

States to States. Overall, the sector is underfunded, not without consequences.

Role of the NRHM in Healtthcare finance

The Mission seeks to provide universal access to equitable, affordable and quality health

care which is accountable at the same time responsive to the needs of the people,

reduction of child and maternal deaths as well as population stabilization, gender and

demographic balance. The NRHM derives its cost norms from three sources: (i) existing

norms of schemes brought under the umbrella of NRHM; (ii) norms and (iii) standards

developed by the National Commission on Macro Economics and Health; A diverse set

of norms are expected to provide flexibility to States in planning and to accommodate

interventions/innovations as required for meeting local needs. For achieving program

efficiencies, the National Disease Control Programmes related to control of TB, Malaria,

Blindness, Iodine Deficiency, and Kalazar. The Integrated Disease Surveillance

Programme and all the Family Welfare Programmes of the Ministry of Health and Family

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Welfare have been integrated under the NRHM. Financial integration is proposed by

creating a single Budget head for NRHM, while other disease control programs such as

Cancer, non communicable diseases, HIV/AIDS prevention etc. will converge their

programs with the NRHM interventions. Such integration is expected to bring down

duplication of services and make better use of existing resources. Optimizing existing

resources and infrastructure will alone release an estimated 30% of existing budgetary

outlays for alternative use. The National Commission on Macro Economics and Health

has provided the cost of a package of services to be provided at the primary and

secondary levels of health care facilities. The core and basic package include childhood

diseases/health conditions, maternal diseases/health conditions, blindness, leprosy, TB,

Vector borne diseases, preventive and promotive activities, minor injuries, other minor

ailments, and snake bite. The NCMH also provides standard costs for non-recurring and

recurring costs of Sub Health Centres, PHCs, and CHCs. The Ministry of Health and

Family Welfare has developed IPHS for SHC/PHC/CHC and is in the process of

developing IPHS for Sub Divisional and District Hospitals. The NCMH assessments,

read with the IPHS and the actual Facility Survey of each health facility, will determine

the actual resource need. The over all resource envelope for NRHM has been projected

as per assessment of NCMH, which is in line with the CMP promise of raising public

expenditure on health to 2-3 % of the GDP. Specific norms have been proposed for

untied grants at al levels of health action. These include (1) grants to Panchayats/Rogi

Kalyan Samitis; (2) capacity building in community organizations; (3) skill needs of

doctors/Para medics/educated RMPs; (4) local criteria and need based selection of

resident health workers/Nurses/Doctors/Specialists as per IPHS; (5) partnerships with the

Non Governmental sector; (6) nurturing and development of ASHAs; (7) strengthening

of Block and district level management; (8) improving physical infrastructure for health;

(9) grants to Rogi Kalyan Samitis at PHC, CHC, Sub Divisional, District Hospital in all

States and to Government Medical centre and Hospitals in special focus States; (10)

grants in-aid to NGOs at district, state and national levels; (11) support for school

health programmes/ ICDS health component, nutrition and health education programmes

for women, resources for surveys, public reports on health, etc.; (12) Social health

insurance as per local models with subsidies only for Below Poverty Line Families at par

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with the current limits under the Universal Health Insurance Scheme; (13) strengthening

nursing institutions/Medical centre in capacity development; (14) Ambulances and

phones at al levels; (15) National and State level Health System Resource Centres and

District and Block level resource Groups;(16) meeting diversity of northeastern States. A

substantial share of the additionality indicated above will have to come from Central

funds. It is proposed that NRHM provide 100% grants to States on a 75-25 sharing basis

between the Center and States during the XIth Plan. The long term additional funding by

the Central Government will significantly improve the central share in overall public

expenditure on health. While doing so, the Central Government will constantly monitor

the state expenditures on health to ensure that they increase in proportion to central

spending in real terms. Given the absorptive capacity in the States and the time it may

take to improve the implementation capacity, it should be fair to assume an annual 30%

increase in health sector allocations up to 2007-08 and an annual increase of 40% from

2009-201o to 2011-12. Following this broad assessment, the Central Government

resource needs are likely to be as follows:

Projected Resource need for NRHM 2005-2012Rupees in crores

years Central govt NRHM allocation

Recurring Non-Recurring

StateContribution

Total

2005 - 06 6500 - - - 6500

2006 - 07 9500 9000 500 - 95002007 - 08 12350 11000 1350 2179 14529

2008 - 09 17290 13000 4290 3051 20341

2009 - 10 24206 16206 8000 4272 28478

2010 - 11 33884 23884 10000 5980 39864

2011 - 12 47439 42439 5000 8372 55811

Source:NRHM Report 2006

The resources indicated above relate to communicable disease control programmes,

RCH, Family Planning, IDSP (Integrated Disease Surveillance Programme) etc.

programs that come under the NRHM. There is need to, however, also provide anestimate of resources required for the non-communicable disease control programmes

(mental health, vascular diseases, cancer, etc.), HIV/AIDS, medical education, etc. Since

the non-communicable diseases do not entail any externalities, normally public funding is

not provided in a significant manner. However, with evidence suggesting increasing

prevalence of hypertension, mental health, accidents & injuries affecting a large number

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of poor and the treatment under all these conditions being exorbitant, public health

financing has to take into account provisioning of free treatment in all public health

facilities for these diseases/conditions. It is accordingly recommended that 20 per cent of

the total amount projected in the table above may be provided additionally for tertiary

care which may also include medical education and research.

Need for new avenues of health financing

The NRHM working Group expressed its desire to explore new health financing

mechanisms in order to reduce the burden of health expenditures among the poor

households. The National Commission on Macroeconomics & Health has pointed out that

3.3% of Indias population is impoverished every year on account of health distress.

There is also evidence to suggest that the poorest 10% of the population rely on sale of

assets to meet their health care needs. A study in some of the poorest districts by some

states 2002 had revealed that illness of a family member is the most common reason

among poor households leading to a financial crisis and causing a sense of insecurity.

Nearly 40% of the Below Poverty Line families reported having faced a financial crisis

during the last two years and about 69% of these was on account of illness and 11% on

account of a death of a family member. Clearly poor people in rural areas are spending

significant amounts on health care leading to their impoverishment.

Need for participation of government funded public health institutions

The Group deliberated on the participation of Government Health Care facilities in any

innovative risk pooling arrangement. The Group felt that the participation of Government

Hospitals and Health Centres was very critical for any risk pooling arrangement as

otherwise it becomes a system of subsidizing private health care. It was also felt that the

challenge of risk pooling for remote rural households can only be met when public health

systems are also a part of such innovative health financing mechanisms. Any kind of

Health Insurance Scheme, which does not involve the public medical facilities, would not

succeed because, in majority of states, these are the only facilities available in rural areas.

The involvement of the States could be worked out by designing a Plan Scheme by the

Ministry of Health and Family Welfare with subsidy being passed on to the hospitals

through the State Governments. In such a situation, the State Governments can invite bids

on premium to the charged at their level from all the insurance companies, both public

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and private. For availing of the subsidy from the Central Government, the minimum

features of the Scheme could be decided a priori and informed to the State Governments.

The State Government may add some more features to the scheme and may also provide

financial assistance to the policyholders by contributing whole or part of the premium. In

this scenario, the modalities of administering the scheme at different levels may be

described in detail by the Central Government or may be left to the State Governments.

Innovative financing for efficiency

Innovative mechanisms of health financing can be used to improve accountability of the

health system, be it in the public or private sector. For example if a CHC were to receive

resources directly on the basis of their case load, it would contribute to a more effective

service delivery. Similar would be the case of the private sector. For involving the

private sector as a provider of care paid for by a public financing system, there is need to

establish effective standards, capacity to monitor their enforcement, and a regulatory

framework for ensuring that providers did not exploit the market imperfections so

inherent in the health sector. The work of the National Commission on Macroeconomics

and Health on unit costs for core, basic and secondary health care package alongside the

facility survey of the public and private sectors in some districts could be a useful starting

point for developing standard cost and treatment protocols and a basis for public private

partnerships in health service delivery.

User Charges

Among the various financing options to fund recurrent costs, user charges remain the

most controversial. The possibility of their implementation in the public sector was put

primarily on the policy agenda following the World Banks policy document on

Financing Health Services in Developing Countries: An Agenda for Reform in 1987. The

economic rationale behind the imposition of user fees emphasises that: i) payments for

services will discourage frivolous use of health facilities; ii) by making payments

consumers will become conscious of quality and will demand it and iii) the greater funds

availability of funds through user fees at the point of service will increase both the

availability and quality of services (Griffin, 1987). However, in practice the positive

benefits envisaged through user charges did not materialise or were over-shadowed by

other negative unintended outcomes. The socially regressive impact of user fees in

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particular has been prominently highlighted in the experience of most of the developing

countries. The exhaustive reviews by Creese (1991) summarise the experiences of user

fees in many Asian and African countries. It has been found that owing to exemptions for

indigent and the poor, the user fees cannot recover the entire recurrent costs. The

proportions of cost recovery in terms of gross yield vary between 5-15 percent. In terms

of the total budget of health ministry, for instance, the collections from user fees may be

as low as 3 percent. Studies in different countries for the most part indicate a dampening

impact of user fees on the utilisation of health services. The decline in pre-natal contacts

were around 11 percent. Generally it is the poor who tend to respond negatively to price

increases thereby affecting equity. The study results indicate higher sensitivity to the

costs of diagnostic services relative to registration fees. Further, the vulnerability owing

to user fees has been focussed on certain age groups and types of diseases. Following the

reforms in 1980s, in China the emphasis on user fees to obtain self sufficiency in health

service finance has also been associated both with a regressive impact on utilisation and

with wasteful investment on inappropriate high-tech equipment. The study by Mcpake

(1993) found that in most countries examined the incentives created by the pricing

structure of these initiatives and the lack of appropriate exemption mechanism to protect

vulnerable groups were the problem areas. Cost increases to patients by user charges can

be partly mitigated by supply-side cost sharing cost control and containment measures. It

has been pointed out by Hodgkin and Mcguire (1994) that to pay providers in advance on

the basis of the average cost of treating groups of diagnostically related illnesses would

make providers more cost conscious and thus cost reduction or containment will take

place.

Literature Review

Ravi Duggal (2004) in his article India is the most privatised health market in the world.

Public support for healthcare has been historically low in India, averaging less than 1 per

cent of the GDP, but what is worse is that in the last decade public health investment and

expenditure has seen a secular declining trend. During the same period the private health

sector grew rapidly, from being about 3 per cent of GDP in the beginning of 1990s to

over 5 per cent today. In fact, the health sector has been growing at the rate of 1.4 times

that of the GDP. This also means that the burden out-of-pocket on households is also

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increasing rapidly and more so for the poorer sections, especially since the public health

expenditures are declining. The total value of the health sector in India today is over Rs

1,500 billion or US$ 34 billion. This works out to $34 per capita which is 6 per cent of

GDP. Of this 15 per cent is publicly financed, 4 per cent is from social insurance, 1 per

cent private insurance and the remaining 80 per cent being out of pocket as user-fees (85

per cent of which goes to the private sector). Two thirds of the users are purely out-of-

pocket users and 90 per cent of them are from the poorest sections. The tragedy is that in

India, as elsewhere, those who have the capacity to buy healthcare from the market most

often get healthcare without having to pay for it directly, and those who are below the

poverty line or living at subsistence levels are forced to make direct payments, often with

a heavy burden of debt, to access healthcare from the market. National data reveals that

50 per cent of the bottom quintile sold assets or took loans to access hospital care. Public

financing of healthcare comes largely from state government budgets, about 80 per cent,

and the balance from the Union government (12 per cent) and local governments (8 per

cent). Of the total public health budget today, about 10 per cent is externally financed in

contrast to about 1 per cent prior to the structural adjustment loan from the World Bank

and loans from other agencies. Private financing is mostly out-of-pocket with a large

proportion, especially for hospitalisations,

D. Narayana K. K. Hari Kurup (2000) highlighted the changing scenario of the healthcare

financing in India in the wake of globalisation process initiated during early 2000s and

the structural changes taking place in the health sector. the health sector in India and

raises issues related to accessibility, efficiency, and quality of the health delivery in the

face of glaring inter-state variations and discouraging healthcare financing situation. The

rising health needs particularly in the backward and low income states, sluggish health

outcomes, dwindling budgetary allocations and heavy household out-of-pocket

expenditure on health pose serious challenges to healthcare financing in India, different

issues for the financing of health care in India, where the effect of structural adjustment

has been to undermine the traditional resource base. The relative merits of user fees,

insurance schemes, administrative decentralisation, taxes and partial privatization are

discussed. The impact of this expenditure reduction is also being felt on the health care

sector. The central grants to states declined from 19.9 per cent to 3.3 per cent. The impact

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of this decline is most noticeable on specific purpose central grants for public health and

disease control programmes. The impact of this falling share of central grants was more

pronounced in the poorer states which are unable to raise local resources to compensate

for this loss of revenue. mainly the approach of the resource base of the health care

sector: I) to adopt the system of cost recovery at the secondary and tertiary level health

institution; ii) to adopt other innovative financing mechanisms including specific

taxes,cesses, local levies and community level endowment funds supplementing public

funding and provision of public health services; iii) to initiate suitable health insurance

coverage with appropriate public private mix; iv) adopt another mode of health care

delivery where the government encourages private sector participation by taking up the

role of public purchaser of private services. The healthcare financing system in India is

dependent on government budgetary allocations and private financing. The role of private

financing has increased significantly in recent years. It is estimated that people spend

about 4.5% of the GDP on healthcare needs and this is about three fourths of the health

care expenditure. Most of it is out-of pocket private expenditure, which has grown at

the rate of 12.5%, and for each 1% increase in the per capita income it has increased by

about 1.44%, this study seeks to analyses decentralisation of the health care sector in

India.

Melitta Jakab and Chitra Krishnan (2001) To reviewed the literature to date on

community financing in order to explore what community financing is assess the

performance of community involvement in health Financing in terms of the level of

mobilized resources, social inclusion, financial protection; and establish the determinants

of reported performance results, including technical design characteristics, management,

organizational, and institutional characteristics: Community financingis an umbrella termused for several different resource mobilization instruments. The instruments vary in the

extent of their prepayment and risk sharing, in their resource allocation mechanisms,

organizational and institutional characteristics. Nevertheless, the common features they

share include the predominant role of the community in mobilizing, pooling and

allocating resources, solidarity mechanisms, poor beneficiary population, and voluntary

participation. Performance of community-based financing. (I) Community financing

mechanisms mobilize significant resources for health care. However, there is a large

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variation in the resource mobilization capacity of various schemes. This review did not

find systematic estimates about how much community financing contributes to health

revenues at the local and/or national level. (ii) Community financing is effective in

reaching a large number of low-income populations who would otherwise have no

financial protection against the cost of illness. There is large variation in the size of

various schemes. At the same time, there are no estimates about the total population

covered through community financing. There are indications that the poorest and socially

excluded groups are not automatically reached by community financing initiatives. (iii)

Community-based health financing schemes are systematically reported to reduce the

out-of pocket spending of their members while increasing their utilization of health care

services. The reviewed literature is very rich in describing the phenomenon referred to

as community financing in terms of scheme design and implementation. Although this

review found several systematic patterns of performance, there continues to be a need for

a stronger evidence base regarding the performance of community-based resource

mobilization mechanisms as health care financing instruments.

NRHM working group report (2006) The Working Group on Health Financing initiated

the deliberations keeping in mind the need to ensure an equitable and efficient health

system through the rational use of resources. In reviewing the present position of health

financing and the existing system of health financing in the country (NCMH 2005), The

WG also reviewed the health spending estimates as provided under the National Health

Accounts framework for the year 2001-02 and later reiterated by the Ministry of Health

The Report of the Task Force on Innovative Health Financing Mechanisms under the

NRHM (December 2005). The Report recommended the need to develop systems for risk

pooling for obtaining access to medical services from the public and private facilities in

accordance with commonly agreed standards and prices. Based on this the Ministry of

Health & Family Welfare has developed a framework for Community Health Insurance

advocating a policy of different approaches being adopted as far as risk pooling and

community health insurance is concerned. Approval of the detailed Framework for

Implementation of the National Rural Health Mission (July 2006). The approval includes

in principle agreement on financial resources for the NRHM 2005-2012 in line with the

commitment made in the Common Minimum Programme and the recommendations of

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the NCMH, providing for an annual increase of 30-40% Central Government allocation

and 10% by States. Government has in the last one year initiated several

interventions under the National Rural Health Mission (NRHM) in 4 key

areas that when implemented will have a significant impact on

reducing current inequities in health care financing and access.(1).

Decentralized planning under which every district is expected to prepare a perspective

and an Annual District Health Action Plan 2005-2012, projecting the basic health care

needs of local communities, integrating also the wider determinants of health and

combining promotive, preventive and curative care in a common referral link that perates

from the village to the District Hospital. This process is based on the principle of

decentralization of funds and functions to Panchayat Raj institutions and locally elected

bodies, hospital committees in partnership with community organizations and Village

Health and Sanitation Committees and broader civil society; (2). Strengthening of

management capacity at all levels, with equal emphasis on skill development and

development of the required human resources for coping future health challenges; (3).

Improved financial management by providing flexibility and making it Performance and

outcome based; (4). Improved delivery of services based on the recognition of the need

to guarantee a minimum package of services to every citizen at all the levels of care;

Analyses of rural healthcare financing1. The central government while fully financing the family welfare programmes,

finances the national disease control programmes on a 50:50 basis. The states'

share, in fact, rises to about three-fourths as the state has to bear all the

administrative costs.

2. Indian states the finding of the World Bank cross-country analysis that as

countries get richer, they tend to spend more of their incomes on healthcare, and

the government's share grows larger.

3. The different methods suggested include: introduction of user fees, public private

partnership including the voluntary sector (NGOs), dual pricing system, increase

in the registration fee, effective regulation of private sector and achieving cost

effectiveness through better planning at all levels in the healthcare system.

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Among all these aspects, public private partnership (PPP) has assumed greatest

importance.

4. The way in which the sector is financed determines the effectiveness of service

delivery and requires an understanding of the financing mechanisms in this sector.

Health being a State subject, the sector is financed primarily by the State

Governments.

5. The primary source of public financing is the general tax and non-tax revenues.

These include grants and loans received from both internal and external agencies,

6. The National Commission on Macroeconomics & Health has pointed out that

3.3% of Indias population is impoverished every year on account of health

distress. There is also evidence to suggest that the poorest 10% of the population

rely on sale of assets to meet their health care needs.

7. The work of the National Commission on Macroeconomics and Health on unit

costs for core, basic and secondary health care package alongside the facility

survey of the public and private sectors in some districts could be a useful starting

point for developing standard cost.

Conclusion

1. India's considerable development in the health sector is still under stress. Issues

related to accessibility, efficiency, and quality of healthcare delivery in the face of

glaring inter state variations continue to haunt the policy makers.

2. In addition, India is passing through demographic and epidemiological transition

and non-communicable diseases are emerging as major health problems. In the

face of the rising healthcare needs of the population and the concern for the poor,

3. The globalisation policies while squeezing budgetary support both by the centre

and states have forced governments to look for alternatives in healthcare

financing.

4. The health-financing situation in India is not very encouraging. Indian healthcare

spending, particularly on preventive and promotive care is poor. With rising

interstate disparities, and deplorably low and dwindling budgetary allocations at

the state level, households are forced to incur heavy out-of-pocket expenditures

on healthcare.the issues is How to meet the rising healthcare requirements of the

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people, who are poor and residing in remote areas, when affordable public sector

secondary and tertiary levels hospitals equipped with hi-tech curative and super

specialty equipment are not developed,

5. The private sector is loathe to provide healthcare services at subsidized rates in

these areas--is the major challenge before the country. Public private partnership

is being considered an important alternative but an overall policy blueprint is still

not in place.

6. The implementation of the above process would be critically dependent on the

state and central government agreeing to changing the financing mechanism and

giving complete autonomy to district panchayatand health institutions. With thefinancing mechanism in place, both panchayatand the health bureaucracy districtauthorities would require appropriate capacity building to manage the

restructuring of the healthcare system.

7. Private health providers and their associations will have to be brought on board at

an early stage through discussions that explain to them the benefits of joining

such a system. Those serving in public health institutions will have to be trained

and appropriately informed to manage and run such a system. Above all, local

governance bodies and civil society groups will have to be oriented and become

skilled in planning, monitoring and auditing the functioning of the system.

8. It is important to re-emphasize that healthcare is a public good and not to be left

to the vagaries of the market. Instead, it should be organized and regulated, using

both public and private resources, for social benefit. Furthermore, the delivery of

healthcare should be decentralized at an appropriate community level rather than

(as at present) planned at the central or state level. The role of the centre and the

state should be to formulate strategies, mobilize and disburse resources, and

monitor outcomes.

References

1 NRHM Report of the working group on health care financing including health

insurance for the 11th five year plan oct 2006, Ministry of Health & Family

Welfare

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2 k. sujath rao(2004) : national commission on macro economic and health government,

financing delivery of healthcare in indiaSUJA

3 The World Bank. 1987. Financing Health Services in Developing Countries: An

Agenda for Reform T4.Arora, G.K. 2002. Globalisation, Federalism and Decentralisation-Implications for

India. Delhi: Bookwell.

5.Bhat, Ramesh. 2000. "Issues in Health--Public Private Partnership." Economic and

Political Weekly. 34(52 & 53): pp. 4706-16.

6.Buss, Paulo Marchiori. 2002. "Globalisation and disease: in an unequal world, unequal

health!" Cadernos de Saude Publica. 18 (6): pp. 1783-89

7.Cornea, Giovanni Andrea. 2001. "Globalisation and health." Bulletin of the World

Health Organisation. 79 (9): pp. 834-41.

8.Dollar, David. 2001. "Is Globalisation good for your health." Bulletin of the World

Health Organisation.

9.Fidler, David P. 2001. "The Globalisation of public health: the first 100 years of

international health diplomacy." Bulletin of the World Health Organisation.

10.Government of India. 2001. Indian Planning Experience. Planning Commission,

11.Government of India. 2002a. Tenth Five Year Plan 2002-07. Planning Commission,

12.Government of India. 2002b. National Health Policy--2002. Ministry of Health andFamily Welfare, New Delhi. (http://mohfw.nic.in/np2002.htm)

13.Government of India. 2003. Economic Survey 2002-2003. New Delhi: Ministry ofFinance. (www.indiabudget.nic.in/es2002-03/esmain.htm)

14.Gumber, Anil. 2002. "Economic Reforms and the Health Sector: Towards HealthEquity in India." In Reform and Employment. Eds. Institute of Applied ManpowerResearch. New Delhi: Concept Publishing House, pp. 235-284.

15.Kumar, Girish. 2003. "Promoting Public-Private Partnership in Health Services".Economic and Political Weekly. 38 (29): pp. 3041-45.

15.Mahal, A., J. Singh, F. Afridi, V. Lamba, A. Gumber, and V Selvaraju. 2002. WhoBenefits from Public Health Spending in India? New Delhi: National Council of AppliedEconomic Research.

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16.Shariff, Abusaleh, Anil Gumber, Ravi Duggal and Mooner Alam.1999. "HealthcareFinancing and Insurance: Perspective for the Ninth Plan, 1997-2002".

17.World Bank. 1995. India: Policy and Finance Strategies for Strengthening PrimaryHealthcare Services. World Bank.

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20. D. Narayana and K. K. Hari Kurup(200): DECENTRALISATION OF THEHEALTH CARE SECTOR in India , Working Paper No. 298

21. Melitta Jakab and Chitra Krishnan (2001):healthcare community financing issues inIndia

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