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Health Expenditure & Financing:
                 India


 State Institute of Health and Family Welfare, Jaipur




02/02/2...
“Health”
                  Is a “product” of
                    “Health care”




02/02/2010   SIHFW: an ISO 9001: 2008 c...
Health System Components




                                                                                Service
Resou...
Challenges

             •   Manpower- Number & Norms
             •   Rural / Urban differential
             •   Geograp...
Why bring economics to health

             •   New emerging diseases,
             •   Changing disease profile,
        ...
Economics

    Study how man and society end up choosing to
    employ the scarce resources that could have
    alternativ...
Health economics


         • Study of-How resources are allocated to
           and within Health sector
               •...
Why Health economics


 • NO health care system has achieved level of
   spending sufficient to meet all its client need f...
• Developed countries
    Higher investment in health                                  High Life
  expectancy

           ...
Health expenditure

                   Public                                  Private

                       Out of Pock...
Drivers of health cost



                  • Human Resource
                  • Technology
                  • Drugs




...
Types of Health expenditure:
             • Public goods-
                  • Cannot be acquired by individuals (e.g.
    ...
Some facts

 • 1125000 Practitioners, 125000 in Govt., 59% in
   cities
 • 49% of beds, 42% of occupancy (private sector)
...
• < 1% of GDP

      • Proportion of Total Health Exp.: Govt-20%

      • Private health exp.:

             – 80% of tota...
Who pays?

• Health Authority?

• Government?

• Taxpayer?




    SIHFW: an ISO 9001: 2008 certified Institution   15
Share in health care spending
      Source: CBHI, NHP, 2006




                 25%
                                     ...
Who really pays?

  • Opportunity cost -
    if we choose to do one
    thing, the cost of doing that
    is the value whi...
Health Expenditure as % of total Plan
                              Outlay
7                                   Source: CBH...
Total Govt. Expenditure on Health as % of GDP
1.2                         Source: CBHI, NHP, 2006

                       ...
Per Capita Public Exp. on Health
                                 Source: CBHI, NHP, 2006

220                            ...
Status of Expenditure in FYPs
                        Source: CBHI, NHP, 2006

                   Total Plan
  FYPs       ...
160000                                                                                                 2500000
           ...
% of total budget allocated to health
7                                  Source: CBHI, NHP, 2006
                         ...
Health Care Spending (2004-05)
                          Source: NCMHGI, 2005
1400           1377

1200

1000             ...
Expenditure Patterns


             • Public expenditures –declining trends

             • Out of pocket – increasing
   ...
Health Spending: Facts
  • Public Domain
    – Center: Rs.35 bi (0.13% GDP)
    – State: Rs.186 bi (0.72% GDP)
    – Local...
Budget: Rajasthan

             120000
             100000
              80000

Rs. in Lacs   60000
              40000
  ...
Health Financing




02/02/2010   SIHFW: an ISO 9001: 2008 certified Institution   28
Issues in Health financing:


              • Reduce out-of-pocket payments
              • Increase the accountability to...
Key issues in Health financing
       •     What is total spending on health
       •     Who is spending it
       •     ...
National Health Spending
  Uses             Central         State &               Corporate/           Household   Total
 ...
Recommendations

              Plan allocations & % of GDP
•   Alma-Ata-5%
•   CSSR-ICMR-6% (1982)
•   CCHFW (1989)-7% of ...
Health Care Spending (2004-05)
                      1377
         1400

         1200                                    ...
2500
 2500
                 Out of pocket expenditure on Health (2004-05)
 2000
                                          ...
What it is being spent on
Curative                   Preventive                                  Primary Care
49.7 %      ...
Role of Health Economics


                       Choice-Decision making
                       Scarce resources
         ...
Choosing-Decision making
             • Allocative efficiency
                   • Where to park the resources
           ...
Rationing of Health care

• Economics concerned with choice between
  competing alternatives
• Based on axiom of scarcity ...
Scarcity



  Need
                                       Demands

             Desire
                                   ...
Basis of rationing

Price system -         objective = efficiency
                       consumer sovereignty



Non-price...
Alternative use

Opportunity cost:
                         possibility of alternative use
                         of mon...
One IVF course = INR 85000
                What is the opportunity
                         cost?
             One-third o...
Medical Care and Utility


• Medical care is an input in producing health
® Subject to law of diminishing marginal product...
Medical Care and Utility

    Utility




                                        Medical Care
       as the level of medi...
Consumer’s Optimal Choice of
                  Health
    Define : MU = marginal utility of medical care
                 ...
Proof
             •   Suppose that instead :
                                                         MUq                ...
Deriving a Demand Curve for
                    Physician Visits
  let q represent physician visits
  •   Suppose Pq rises...
Economics seek an answer

• What influences health? (other than health care)
• What is health and what is its value
• The ...
Cost of care:
             Private v/s Public

• Direct-                                • Indirect-
      • Medicine,     ...
Estimating Demand for Medical
                    Care
   • Quantity demanded
         – out-of-pocket price
         – re...
What dictates Private sector

               •   Capital & recurring cost
               •   Payment schemes
             ...
What Health economics should
            mean to Profession




        • Matching inputs to outputs and outcomes




02/0...
Taking care of cost: what to do


   • Ensure stable financing mechanism
   • Enhance financial protection and social safe...
Sources of Financing


             • Taxation,
             • Health insurance,
             • Private payments –Out of P...
Which source


             – People’s capacity to pay,
             – Administrative capacities to collect,
             ...
• Need for User charges-
                  1. Too many to use the public
                      services
                  ...
Why user charges?


       • People misuse just because it is “Free”
       • Revenue generated can improve quality
      ...
• Mechanism for introducing User
               charges-
                  • Dual pricing
                  • Graded charg...
• Some more approaches for Financing
  Health care are-
                   • Introduction of User fee with
               ...
Tools for Health care financing

             •   Health Insurance
             •   Regulation and Legislation
           ...
Thank You

             For more details log on to
             www. sihfwrajasthan.com
                          or
     ...
Prochain SlideShare
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Health Expenditure & Financing

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Health Expenditure & Financing

  1. 1. Health Expenditure & Financing: India State Institute of Health and Family Welfare, Jaipur 02/02/2010
  2. 2. “Health” Is a “product” of “Health care” 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 2
  3. 3. Health System Components Service Resource Programs Economical Management delivery Production Organization Support 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 3
  4. 4. Challenges • Manpower- Number & Norms • Rural / Urban differential • Geographical divide across States • S-E groups –accessibility/ reach • Gaps between Policy & Action • Health sector expenditure • Newer Infections 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 4
  5. 5. Why bring economics to health • New emerging diseases, • Changing disease profile, • Technical and diagnostic advances, • Longevity of life, • Expectations of people, • Subsidies and cross-subsidies • Increasing non-plan expenditure, • Competing priorities and • Improving awareness among people; 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 5
  6. 6. Economics Study how man and society end up choosing to employ the scarce resources that could have alternative use Choice-Decision making Scarce resources Alternative use 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 6
  7. 7. Health economics • Study of-How resources are allocated to and within Health sector • Resources are scarce • Production of Health care and its distribution across pop. 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 7
  8. 8. Why Health economics • NO health care system has achieved level of spending sufficient to meet all its client need for Health care. 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 8
  9. 9. • Developed countries Higher investment in health High Life expectancy Increased Purchasing power parity • Developing countries Poor investment in health low Life expectancy 02/02/2010 Low Purchasing power parity SIHFW: an ISO 9001: 2008 certified Institution 9
  10. 10. Health expenditure Public Private Out of Pocket 80% of Health expenditure is private (WHO,2004) Profit Maximization 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 10
  11. 11. Drivers of health cost • Human Resource • Technology • Drugs 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 11
  12. 12. Types of Health expenditure: • Public goods- • Cannot be acquired by individuals (e.g. Water and Sanitation program) • Are used by community • Externality goods • Individuals can acquire (e.g. Immunization) • Individual use can benefit community • Private goods • Acquired by individuals (e.g. Private Hospitals) • Used by individuals 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 12
  13. 13. Some facts • 1125000 Practitioners, 125000 in Govt., 59% in cities • 49% of beds, 42% of occupancy (private sector) • 40 Doctor/100000, 32 Nurses/ 100000 pop. • (National average-59/ 100000, 79/100000) • Developed country average: 200/ 100000 • 76 drugs (25% of essential) under price control • 50% of spending in health is on drugs 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 13
  14. 14. • < 1% of GDP • Proportion of Total Health Exp.: Govt-20% • Private health exp.: – 80% of total health cost – 97% : OOP • One hospitalization: 60% of annual income • Outpatient care accounts for 61 per cent of private healthcare spending 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 14
  15. 15. Who pays? • Health Authority? • Government? • Taxpayer? SIHFW: an ISO 9001: 2008 certified Institution 15
  16. 16. Share in health care spending Source: CBHI, NHP, 2006 25% Govt. Public/Private 2% Enterprises 68% Insurance 3% 2% NGOs Households SIHFW: an ISO 9001: 2008 certified Institution 16
  17. 17. Who really pays? • Opportunity cost - if we choose to do one thing, the cost of doing that is the value which would have been obtained from the best alternative choice • Who pays - the person who does not receive treatment 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 17
  18. 18. Health Expenditure as % of total Plan Outlay 7 Source: CBHI, NHP, 2006 6.5 6 5 4.09 3.97 4 3.9 3.4 3.1 3.2 3.1 3.1 3.1 3.2 3 2.9 2.8 2.9 2.9 2 1 0 SIHFW: an ISO 9001: 2008 certified Institution 18
  19. 19. Total Govt. Expenditure on Health as % of GDP 1.2 Source: CBHI, NHP, 2006 1.05 1 0.96 0.91 0.91 0.88 0.9 0.86 0.81 0.83 0.8 0.74 0.63 0.61 0.6 0.49 0.4 0.2 0.22 0 SIHFW: an ISO 9001: 2008 certified Institution 19
  20. 20. Per Capita Public Exp. on Health Source: CBHI, NHP, 2006 220 214.62 202.22 200 184.56 183.56 180 160 140 120 112.21 100 80 64.83 60 38.63 40 19.37 20 11.15 0.61 1.36 2.48 3.47 6.22 0 SIHFW: an ISO 9001: 2008 certified Institution 20
  21. 21. Status of Expenditure in FYPs Source: CBHI, NHP, 2006 Total Plan FYPs Investment Health Family Welfare I 1960 65.2 0.1 II 4672 140.8 2.2 III 8576 225 24.9 IV 15778.8 335.5 284.4 V 39322 682 497.4 VI 97500 1821 1010 VII 180000 3392 3256.2 VIII 798000 7575.9 6500 IX 859200 10818 15120.2 X 1484131.3 31020.3 27125 XI NA 46669 89478 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 21
  22. 22. 160000 2500000 Total Outlay – Plan and Health (including 140000 AYUSH & FW) 2156571 140135 Source: CBHI, NHP, 2006 2000000 120000 Total plan outlay 100000 1484131 1500000 Heath sector 80000 859200 1000000 60000 58920.3 40000 434100 500000 35204.9 218729.6 20000 39426.2 109291.7 1960 4672 8576.5 15778.8 14102.2 0 6809.4 0 145.8 250.8 613.5 1252.6 3412.2 65.3 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 22
  23. 23. % of total budget allocated to health 7 Source: CBHI, NHP, 2006 6.31 6 5 4 3.3 3 3 2.6 2.31 2.1 1.9 2 1.8 1.7 2.09 1.7 1 0 I II II IV V VI VII VIII IX X XI 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 23
  24. 24. Health Care Spending (2004-05) Source: NCMHGI, 2005 1400 1377 1200 1000 India Rajasthan 808 800 600 400 200 73.5 70 22 24.5 4.5 5.5 0 Per capita Household Public Other expenditure SIHFW: an ISO 9001: 2008 certified Institution 24
  25. 25. Expenditure Patterns • Public expenditures –declining trends • Out of pocket – increasing burden, especially the poor and in rural areas 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 25
  26. 26. Health Spending: Facts • Public Domain – Center: Rs.35 bi (0.13% GDP) – State: Rs.186 bi (0.72% GDP) – Local: Rs.25 bi estimated (0.10% GDP) – Social Insurance: Rs. 12 bi (0.05% GDP) • Private Domain – Out-of-pocket: Rs.1200 bi (4.62% GDP) – Insurance (public sector) Rs.8 bi (0.03% GDP) – Pharma Industry Rs. 250 bi (0.96% GDP) 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 26
  27. 27. Budget: Rajasthan 120000 100000 80000 Rs. in Lacs 60000 40000 20000 0 1 2 3 4 5 6 7 8 9 10 Five year Plans 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 27
  28. 28. Health Financing 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 28
  29. 29. Issues in Health financing: • Reduce out-of-pocket payments • Increase the accountability towards health care provision • Risk pooling & Risk sharing. 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 29
  30. 30. Key issues in Health financing • What is total spending on health • 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 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 30
  31. 31. National Health Spending Uses Central State & Corporate/ Household Total Govt. Local Govt. 3rd Party s Primary 4.3 5.6 0.8 48.0 58.7 Care • Curative 0.4 3.0 0.8 45.6 49.7 • Preventive 4.0 2.7 0.0 2.4 9.0 & Promotive Care Secondary/ 0.9 8.4 2.5 27.0 38.8 Tertiary in Patient Care Non Service 0.9 1.6 NA NA 2.5 Provision Total 6.1 15.6 3.3 75.0 100.0 Source: World Bank, 1995. SIHFW: an ISO 9001: 2008 certified Institution 31 02/02/2010
  32. 32. 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% 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 32
  33. 33. Health Care Spending (2004-05) 1377 1400 1200 India 1000 Rajasthan 808 800 600 400 200 73.5 70 22 24.5 4.5 5.5 0 Per capita Household Public Other expenditure Source: NCMH, 2005 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 33
  34. 34. 2500 2500 Out of pocket expenditure on Health (2004-05) 2000 1700 1500 1500 1000 1000 900 800 750 550 550 500 0 Based on NHA-2000-01, extrapolated for 2004-05 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 34
  35. 35. What it is being spent on Curative Preventive Primary Care 49.7 % 9.0% 58.7% 38.8% 2.5% • Secondary Non Service Provisions • Tertiary 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 35
  36. 36. Role of Health Economics Choice-Decision making Scarce resources Alternative use 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 36
  37. 37. Choosing-Decision making • Allocative efficiency • Where to park the resources • What discipline to develop (Priority) • Market research • Investment cost » Human resource availability » Technology & outrage • Expected Return » Purchasing power » Service utilization » Marketability » Competition 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 37
  38. 38. Rationing of Health care • Economics concerned with choice between competing alternatives • Based on axiom of scarcity - resources limited relative to wants • Fundamental ‘economic problem’ is therefore allocation of these scarce resources • ‘Rationing’ (priority-setting) just another term for resource allocation 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 38
  39. 39. Scarcity Need Demands Desire Resources 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 39
  40. 40. Basis of rationing Price system - objective = efficiency consumer sovereignty Non-price - objective efficiency or equity’? who decides on allocation? allocation by what criteria? 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 40
  41. 41. Alternative use Opportunity cost: possibility of alternative use of money Are the benefits from “chosen” greater than those “forgone” • Burden of disease • Prevalence • Visible impact • Cost- benefit 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 41
  42. 42. One IVF course = INR 85000 What is the opportunity cost? One-third of a cochlear implant 1 heart bypass operation 11 cataract removals 150 vaccinations for Measles, Mumps and Rubella 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 42
  43. 43. Medical Care and Utility • Medical care is an input in producing health ® Subject to law of diminishing marginal productivity • Health yields utility to the consumer ® Subject to law of diminishing marginal utility 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 43
  44. 44. Medical Care and Utility Utility Medical Care as the level of medical care rises, each additional unit of medical care yields a smaller increase in utility Given this fact, how does the consumer decide how much health care to purchase? 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 44
  45. 45. Consumer’s Optimal Choice of Health Define : MU = marginal utility of medical care P = price q = quantity of medical services tradeoffs z = quantity of all other goods • Given the consumer’s income, he chooses q and z to maximize utility. • Utility maximization rule : MUq MUZ Pq Pz 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 45
  46. 46. Proof • Suppose that instead : MUq MUZ Pq > Pz Þ Last rupee spent on medical care generates more U than last rupee spent on other goods Þ Consumer could U by purchasing more medical care (q), and less other goods (z) X Then MUq would fall, MUz would rise, until the 2 ratios are equalized 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 46
  47. 47. Deriving a Demand Curve for Physician Visits let q represent physician visits • Suppose Pq rises. This will lead to : MUq MUz Pq < Pz • Consumer can U by purchasing less q, and more z • Pq lower demand for q 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 47
  48. 48. 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 level • Market equilibrium • Evaluation at whole system level; and, • Planning, budgeting and monitoring mechanisms. 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 48
  49. 49. Cost of care: Private v/s Public • Direct- • Indirect- • Medicine, • commuting, • consumables • wage loss, • Intangible- • social cost, • pain, • Fee for facilitation • neglect, • Lodging & Boarding • subsidy 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 49
  50. 50. Estimating Demand for Medical Care • Quantity demanded – out-of-pocket price – real income – time costs – prices of substitutes and complements – tastes and preferences – profile – state of health – quality of care 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 50
  51. 51. What dictates Private sector • Capital & recurring cost • Payment schemes • Technology • Cost of Training • Public expectations • Regulatory mechanism • Taxes • Regulations 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 51
  52. 52. What Health economics should mean to Profession • Matching inputs to outputs and outcomes 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 52
  53. 53. Taking care of cost: what to do • Ensure stable financing mechanism • Enhance financial protection and social safety nets. • Achieve more resource allocation and government spending on cost effective health interventions • Improve institutional capacity and capability in budgeting, pricing, financial planning and management 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 53
  54. 54. Sources of Financing • Taxation, • Health insurance, • Private payments –Out of Pocket expenditure (OoPE) • And external support(Donor agencies- Grants/ Loans) 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 54
  55. 55. Which source – People’s capacity to pay, – Administrative capacities to collect, – The Nature and quality of services , and 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 55
  56. 56. • Need for User charges- 1. Too many to use the public services 2. Limited resources 3. Increasing demand 4. High recurring cost 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 56
  57. 57. Why user charges? • 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 a large extent • Payment increase sense of ownership & Participation 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 57
  58. 58. • Mechanism for introducing User charges- • Dual pricing • Graded charges • Exemption criteria • What determines User Charges? • Cost of care • Cross subsidy costs • Replacement cost including inflation and rupee devaluation 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 58
  59. 59. • Some more approaches for Financing Health care are- • Introduction of User fee with cross subsidy • Public Private Mix using spare capacity • Introducing Sub-contracting & leasing • Build, Opertate,Transfer/ Own • Expanding revenue base ( more services brought under fee) 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 59
  60. 60. Tools for Health care financing • Health Insurance • Regulation and Legislation • National Health Accounts • Resource allocation (Allocative efficiency) • Cost benefit and cost effectiveness analysis • PPP 02/02/2010 SIHFW: an ISO 9001: 2008 certified Institution 60
  61. 61. Thank You For more details log on to www. sihfwrajasthan.com or contact : Director-SIHFW on sihfwraj@yahoo.co.in 02/02/2010

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