Health care and Budgeting

1. Budgeting in Health Care System and
Health Care Financing
1
Presenter: Dr. Vaishnavi C
Guide: Dr. Chethana T
Dept of Community Medicine
MSRMC, Bangalore
6/20/2016

2. Contents
2
Introduction
Budgeting in Health care
Definition,
 Need
Types
Approaches
 Procedure
 Challenges
Union budget 2016-17
12th five year plan
Health Care Financing
Definition
Principles
Sources
Models
Criteria
Trends of financing
Financing in India
NHA
Conclusion & References
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3. Introduction
 Government – to provide affordable, equitable,
accessible and quality health care
 Progress towards a healthier nation - close correlation of
health sector with economy
 Health care expenditure requires a significant
contribution from the government
 Countries that need the largest health advances are
precisely those spending the least on health
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4. Introduction
 Public health expenditure - component for the
provisioning of health facilities
 *Definition–
“recurrent and capital spending from government
budgets, external borrowings and grants and social
health insurance funds”
*Source: World Bank- Health Systems Financing
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5. Financial Control in Health Settings
 Proper accounting system for funds, equipment
 Laid down standards of performance against which actual
performance would be measured
 Tools of control:
 Budget
 Hospital cost control
 Financial statement analysis
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6. 6
Source: Health Systems Financing- Toolkit on monitoring health
systems strengthening, WHO
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7. Budgeting in health care system
 ‘Budget’ - French word “Bougette”
- leather ‘pouch’ or leather bag
 Public sector invention
 Anticipated receipts & available resources of an
organisation during the given year
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8. ‘Budget System’ was introduced
in India on 7th April, 1860. James
Wilson the first Indian Finance
Member delivered the budget
speech expounding the Indian
financial policy as an integral
whole for the first time
History of budget in India
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9. Post independence, the first
budget was presented on
November 26, 1947 by India's
first Finance Minister Sri
R.K. Shanmugham Chetty.
History of budget in India
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10. Budget:
Definition:
“A statement of future plans described in quantitative
and monetary terms, for a specific period of time, which
is usually one year in case of financial budgets”
11
Source: Union Budget 2016-17. Ministry of Finance, GOI.
http://www.unionbudget.nic.in/
6/20/2016

11. Need for Budget
 Need for proper budgeting arises to allocate scarce
resources to various governmental activities
 Planned expenditure and accurate foresight of
earnings are sine-qua-non
 Has to be based on the long term strategy & focus on
future
 All health care professionals should have a sound
knowledge of budgeting and health care financing
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12. Types of Budgets
• Long term
• Short term
• Current
• Rolling (Progressive)
Time-based Budgets
• Capital based (Planned)
• Operational (Non-Plan)
• Research budgets
Function-based
budgets
Flexibility-based
budgets
•Fixed budgets
•Flexible budgets
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13. Approaches to budgeting in health care
 3 approaches to budgeting:
15
1. Incremental approach
2. Performance budgeting
3. Zero Based Budgeting (ZBB)
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14. 1. Incremental approach
› Previous year’s expenditure is applied to the next year
with additional components
› Only the increment over the previous year’s budget is
actually justified for the present duration
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15. Advantages:
 Easy to prepare, less preparation time and lower
preparation costs
 Easy to understand & prevents conflict
Disadvantages:
 wasteful expenditures and priorities are not ascertained
 Alternative better options are not considered
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16. 2. Performance budgeting
 Presents the actual operations undertaken department-
wise & evaluation of actual performance of the
organisation
 Periodic performance reports is prepared which
compares the budgeted actual performance with the aim
to detect any deviations at the earliest possible.
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17. 3. Zero Based Budgeting (ZBB)
 Must review the existing & old programs, especially
which involve a high degree of discretionary costs
 Justification that the activity proposed is essential, cost
effective is required
 No activity or action is financed simply because it was
done in the past and the entire program must be justified
each time a budget is being drawn up.
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18. Advantages of ZBB:
 Based on cost benefit analysis
 Strictly based on priority of programs/ actions
 Identifies areas of wasteful expenditure
Limitations:
 Planning requires greatest effort and time
 Less applicable for those activities which do not have a
direct cost-benefit relationship
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19. Advantages of budgeting
Effective means of communicating future organizational
plans to all people, in monetary and financial terms
Pre-decided and approved budget serves as an effective
benchmark for monitoring ongoing operations
Reduces wastage and losses by identifying wasteful
expenditures well in advance and rectifying them.
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20. Advantages of budgeting
Budgets through participation, encourage & develop team
spirit and collective responsibility towards excellence.
Basis for assessing performance of senior managers in
any organisation
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21. Procedure of Budgeting in India
23
Ministry of Finance – Shri Arun Jaitley
Department of Economic Affairs
(Secretary - Shri Shaktikanta Das)
Budget Division (Joint secretary)
The finance secretary, revenue secretary, secretary of
Economic Affairs & Planning Commission -
determine the contour of the budget.
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22. Execution of the budget
24
Enactment of the budget
Execution of the budget
Parliamentary control over finance
•Compilation and co-ordination
of the estimates
•Scrutinized by the Planning
Commission
Presenting the budget to
Lok Sabha and Rajya Sabha
Ministries are authorized to
draw the necessary amounts
And spend them
Ensuring that the money has been
spent for the purpose stated by it
Procedure of Budgeting
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23. Key challenges to health care budgeting
in India
 Public expenditure on healthcare to be increased from 1.3
(2014) per cent to 5 per cent of the GDP to match the
global average expenditure
 A robust plan for effective utilisation of existing budgets
so that public expenditure is fully utilised
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24. Key challenges to health care budgeting
in India
 High burden of out - of-pocket expenditure (OOP) in
India
 Hospital bed density - 0.9 per 1,000 persons*
 0.7 doctors per 1,000 patients*
 Focus on geriatric care
 Shortage of medical institutions and with majority
present in urban areas
 Technology promotion
26
Source: Health Systems Financing- World Bank Report
6/20/2016

25. Twelfth Five Year Plan
 Allocation three times greater than 11th five year plan
expenditure
 Share of healthcare – 2.5% of GDP
 Focuses on providing universal healthcare, strengthening
healthcare infrastructure, promoting research and
enacting strong regulations for the healthcare sector
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26. 28
Budget allocation to health care (USD billion)
Source: Planning commission-
http://planningcommission.gov.in/plans/planrel/12thplan/pdf/12fyp_vol2.pdf
6/20/2016

27. Union Budget 2016-17: Vikas ka budget
 Allotments: Total: 31,300 Cr ( 1.58% of total)*
 Medical, Public Health and Family Welfare (Rs.
5188.63 cr)
 Rs.2077.55 cr for major central and medical
institutions
 Rs.384 cr for medical education, training and
research
 Rs.252.70 cr towards Ayurveda, Yoga and
Naturopathy Siddha and Homoeopathy.
29
Source: Union Budget 2016-Ministry of finance, GoI6/20/2016

28. Budget 2016-17 contd...
 New health protection scheme - health cover up to one
lakh per family.
 Prime Minister’s Jan Aushadhi Yojana- 3000 stores
 ‘National Dialysis Services Programme’ under National
Health Mission through PPP mode
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29. Budget 2016-17 contd...
Social Security and Welfare (Rs. 1,329.60 cr):–
 Rs. 760.16 cr for pension and other benefits to freedom
fighters,
 Rs. 61.03 cr for child and women welfare and
 Rs. 67 cr for the welfare and empowerment of persons
with disabilities.
Census, Surveys and Statistics- Rs808.81 cr
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30. 32
Union Budget Proposal 2016-17
1.5%
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31. Shortfalls
 Increasing the public expenditure as proposed by 12th
five year plan to over 2.5 per cent - not been met
 Long way in achieving universal health coverage from
burgeoning healthcare costs
 Efforts to reduce the manpower and skill gap were also
missing from the budget
 Reforms in health care sector is necessary
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32. Guidance for strengthening public
expenditure management
 Strengthened budget formulation process
 Enhanced government capacity for efficient public
expenditure management and monitoring
 To generate expenditure priorities and arbitrate between
competing needs for scarce resources and reflect
government policy objectives
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33. Health care financing
 Financing is the most critical of all determinants of a health
system
 WHO – “function of a health system concerned with the
mobilization, accumulation and allocation of money to
cover the health needs of the people, individually and
collectively, in the health system”
 to ensure that all individuals have access to effective public
health and personal health care
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34. Principles of a health financing system
36
• Have to be collected equitably
and efficiently
Revenue
collection
• costs of health care are shared by
all and not borne by individuals
Pooling
• Used to buy or provide health
interventions that are allocatively
and technically efficient
Purchasing
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35. 37
Action 1:
Establishing
the vision
Action 2:
Situational
analysis
Action 3:
Financial
assessment
Action 4:
Constraint
assessment
Action 5:
Strategy
for change
Action 6:
Implement
ation
Action 7:
Monitoring
and
Evaluation
Decision Process of
Health Financing
Source: Health systems financing-The path to universal coverage - WHO

36. Models of healthcare financing
38
Beveridge
model
Bismarck
Model
National
Health
Insurance
Model
The Out of
Pocket
Model
Source: Health Systems financing. Report - World Bank.
6/20/2016

37. Sources of health care financing
The tax-based public sector
Out of Pocket Expenditure
Insurance- social, community- based, private
External financing
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38. 21
19
14
9
3
9
Corp Tax
Income tax
Service tax
Nondebt capital
Customs
Union excise
40
Sources of tax based Income (%) – India 2015-16
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39. Out of Pocket Expenditure
 Simplest form
 Main financer of health services in India is individual
household
 Consequences:
 Lower the access to health care
 Impoverish the households
41
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40. Insurance
 Most complex mechanism of financing health care
 Objective - manage the revenues equitably and
efficiently allowing for subsidies from healthy to
unhealthy, rich to poor and productive workers to
dependents
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41. 43
• Employees State Insurance
Scheme (ESIS) and the Central
Government Health Services
(CGHS)
Social Health
Insurance (SHI)
• Generally preferable to out of
pocket expenditure
• Increase financial protection
and access
Private Health
Insurance
• Not-for-profit prepayment plans
Community
Health Insurance
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42. Criteria for choosing the financing system
44
Risk pooling
Equity
Economic
Effects
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43. 45
OOP 80%
40%
20%
Health system financing trends:

44. Health care financing in India
 Health sector - high maternal and child mortality, dual
burden of communicable & non-communicable diseases
 Hospitalization for major illness is a cause of
indebtedness for all income groups
 Inability of the poor to access good health care
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45. 47
Private Public Others
Debt financing Annual govt budget for
rural health
Foreign
donations
Foreign direct
investment
Annual govt budget for
urban health
PPP project
funding
External
commercial
borrowing
Govt. funding for
community programmes
Individual investors Govt. sponsored
schemes
Avenues of Health care financing- India

46. Factors influencing health care financing
in India
 Demography data
 Economic Recession
 Expectations from health care
 Drive for Equity
 Changing disease pattern
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47. Health financing issues in India
 Low level of public health expenditure
 18% - no access to OPD services*
 40% have to sell their assets or borrow to pay the bill*
 A mismatch between policy and practice – eg. NACO,
RNTCP
 Weak absorption capacity in the government
 Budgeting - not functional
 Source: NSSO- 2011
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48. 50
Indicators (2014) Value (US$)
Total Health Expenditure (THE) - % (GDP) 5
General Government Health Expenditure
(GGHE) as % of Total Health Expenditure
30
Private Health Expenditure (PvtHE) as % of
Total Health Expenditure (THE)
70
Health expenditure series. Global health expenditure database. WHO
Financial indicators in health care-India
6/20/2016

49. 51
Indicators (2014) Value (US$)
Out of Pocket Expenditure (OOP) as % of
Total Health Expenditure (THE)
62
General Government Health Expenditure
(GGHE) as % of GDP
1.2
Total expenditure on health 97,140
million
General government expenditure on health 29,177
million
Source: Health expenditure series. Global health expenditure
database. WHO
Financial indicators in health care-India
6/20/2016

50. 52
Fig: Trends in centre-state share % in TPHE on health
Source: National Health Profile - 2015
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51. 53
Source: National Health Profile - 2015
Fig: Composition of public expenditure on medical and public
health
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52. National Health Accounts (NHA)
 Consistent, comprehensive information of all the
resources that flow through the country’s health system
over time
 Standard management tool for situation analysis,
planning, monitoring and evaluation purposes
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53. NHA address four basic sets
of questions:
 where do resources come
from
 where do they go
 what kinds of services and
goods do they purchase
 whom do they benefit
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54. Six dimensions are considered:
 Financing sources
 Financing agents
 Providers
 Functions
 Cost of Factors of Production
 Beneficiaries
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55. Conclusion
 Countries have to move forward faster to develop
equitable and efficient institutional structures, revenue-
raising mechanisms and spending prioritizations
 To become more efficient and equitable in the use of
resources
 Need for constant re-evaluation and adjustment
576/20/2016

56. References
 Hanlon JJ, Pickett GE. Public Health – Administration and
Practice. 8th ed.USA: Times Mirror; 1979.p.
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HEALTH CARE. 4th ed. Mumbai (INDIA): Vora Medical
Publications;2014.p.
 Detels R, Beaglehole R, Lansang MA, Gulliford M. Oxford
Textbook of Public Health. 2nd ed. United Kingdom: Oxford
University press;2001.p.
 Health Systems Financing- World Bank [Online] 2016 [Cited on
2016 Jun 10];Available from:URL: http://web.worldbank.org/
586/20/2016

57. References
 Balwar R, Vaidya R, Tilak R, Guptha RK, Kunte R. Textbook of
Public Health and Community Medicine. 1st ed. Department of
community medicine, AFMC, Pune in collaboration with WHO
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 Schieber G, Baeza C, Kress D, and Maier M. Financing Health
Systems in the 21st Century [online] 2006 [Cited on 2016 Jun 2]
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strengthening. World Health Organisation [Online] 2008 [Cited on
2016 Jun 4];Available
from:URL:http://www.who.int/healthinfo/statistics/toolkit_hss/EN
_PDF_Toolkit_HSS_Financing.pdf 596/20/2016

58. References
 Budget in parliament- procedure. Ministry of Finance, GoI
[online] [Cited on 2016 Jun 2];Available from:URL:
http://www.parliamentofindia.nic.in/ls/intro/p4.htm
 BUDGET MANUAL- 2016-17. Ministry Of Finance.
Department Of Economic Affairs, Budget Division, New Delhi
[online] 2016 [cited on 2016 Jun 10];Available from:
http://finmin.nic.in/the_ministry/dept_eco_affairs/budget/Budget
_Manual.pdf
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Prospects – Planning Commission. Planning Commission. Nic
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http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3714944/
606/20/2016

59. References
 Financing and Delivery of Health Care Services in India.
National Commission on Macroeconomics and Health.
Ministry Of Health And Family Welfare Government Of India
& WHO [Online] 2005 [ Cited on 2016 Jun 4];Available from:
URL:
http://www.who.int/macrohealth/action/Background%20Papers
%20report.pdf
 Healthcare Union Budget 2016- Post-Budget sectoral point of
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ocuments/Healthcare.pdf
616/20/2016

60. References
 Choudhury M, Nath HKA. An Estimate of Public
Expenditure on Health in India. National Institute of Public
Finance and Policy (NIPFP) [online] 2012 May [Cited on
2016 Jun 4];Available from:URL:
http://www.nipfp.org.in/media/medialibrary/2013/08/health_e
stimates_report.pdf
 Healthcare Infrastructure and Services Financing in India-
Challenges. Indian Chamber of Commerce [Online] 2012 Sep
[Cited on 2016 Jun 10];Available
fom:URL:https://www.pwc.in/assets/pdfs/publications2012/h
ealthcare_financing_report_print.pdf
 Kurian OC. Financing Healthcare for all in India: Towards a
Common Goal. OXFAM India [Online] 2015 [Cited on 2016 Jun
4];Available from: URL:
https://www.oxfamindia.org/sites/default/files/WP-Financing-
Healthcare-for-All-In-India-29-05-2015-EN_0.pdf 626/20/2016

61. References
 Adedigba MA. Health Care Costs and Comparison of Different
Methods Of Financing Health Care. Organisation of African
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Care-financing-by-Adedigba.doc
 National Health Accounts 2004-05. National Health Accounts
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_Health_Account_04_05.pdf
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12]; Available fom:URL:
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636/20/2016

62. References
 Health financing for universal coverage- Health financing
country diagnostic. A foundation for national strategy
development. WHO [Online] 2010 [Cited on 2016 Jun 10];
Available from:URL:
http://www.who.int/health_financing/tools/diagnostic/en/
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http://siteresources.worldbank.org/INTPEAM/Resources/part3.p
df
646/20/2016

63. It is well enough that people do not understand the
monetary system, for if they did, there would be a
revolution before tomorrow morning
- HENRY FORD
THANK YOU
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