Tracking financial resources for primary health care in BIHAR, India

Transcription

1 2017 Tracking financial resources for primary health care in BIHAR, India Peter Berman, Manjiri Bhawalkar, Rajesh Jha A report of the Resource Tracking and Management Project Harvard T.H. Chan School of Public Health Boston, MA, USA June 2017

2 Table of Contents Acknowledgement... III Abbreviations...IV List of figures...vi List of tables...vii 1. Introduction... 1 Concept and purpose... 1 Scope... 1 Resource tracking and management framework... 1 Key research questions...2 Organization of the report Health Sector in Bihar...4 Demographic overview...4 Healthcare delivery network...4 Human resources in health...4 Health sector outputs and performance in Bihar Methodology... 7 Overview of the approach... 7 Limitations Budgeting and fund flow processes Results...14 Resource mobilization trends and analysis...14 Resource allocation trends and analysis...17 Health expenditure analysis...18 Overall trends...18 Expenditure by levels of care with focus on primary care Expenditure by types of inputs Budget execution and budget utilization analysis Conclusion Policy implication and recommendations...34 Annex 1: Data sources Annex 2: District expenditure analysis...37 Bibliography... 40

3 Acknowledgement This study would not have been possible without the support of the state of Bihar, Bihar State Health Society, and the Bill and Melinda Gates Foundation. This study is financed by the Gates Foundation learning grant Resource Tracking and Management/India. The authors acknowledge the Senior Program Officer, Dr. Hong Wang, for his unrelenting support and technical input. The authors are also grateful for the support from experts at the Foundation s India Country Office, including, Sandhya Rao, Dr. Rajeev Ahuja, and Dr. Jack Langenbrunner; Ms Usha Kiran,and Mr. Debarshi Bhattacharya for their India relevant policy advise. This study would not have been possible for incredible effort by Finance Consultant Mr KC Saha. His expertise and vast network of professional connections made much of the data collection possible. The authors are indebted to several state treasury officers who took the time and made available their staff during the data collection effort. Of particular note in the Department of Finance are Secretary - Resource and Expenditure Mr Venkatesh Prasad; Joint Secretary -Treasury Mr Kameshwar Ojha; Under Secretary Budget, Mr Ajay Kumar Thakur, and their teams. The authors are grateful to the support from Chief Treasury Officers Rakesh Kumar Choudhari, Mohammad Sahik, and Mr Vijay Kumar Azad. Much gratitude is owed to the State Health Society Bihar and its officers and accountants, particularly the Additional Director Finance, Mr. Khalid Arshad. The team would also like to acknowledge the support from Population Foundation of India for state level data. III Acknowledgement

4 Abbreviations AHS ANM APHC ASHA BE CAG CHC DDO DHS DoMH&FW DPMU EDL FC FGD FMR FW GDP GoI GPCE GSDP HMIS HR HSPH IDI IMR JSY MFP NDCP NGO NHM NHSRC NRHM Annual Health Survey Auxiliary Nurse Midwife Additional Primary Health Center Accredited Social Health Activist Budget Estimate Comptroller and Auditor General Community Health Center Drawing and Disbursing Officer District Health Society Department of Medical, Health & Family Welfare District Program Management Unit Essential Drug List Finance Commission Focus Group Discussion Financial Management Report (of NHM) Family Welfare Gross Domestic Product Government of India Government Primary Care Expenditure Gross State Domestic Product Health Management Information System Human Resources Harvard T.H. Chan School of Public Health In-depth Interview Infant Mortality Rate Janani Suraksha Yojana (Mother/Maternal Safety Program) Mission Flexi Pool (of NHM) National Disease Control Program Non-Government Organization National Health Mission National Health Systems Resource Center National Rural Health Mission IV Abbreviations

5 PHC RBI RCH RE RKS RoP Rs. SHB SHC SHE SHSB SPMU TGHB TGHE TOR TRB UC USD VHND VHSNC Primary Health Center Reserve Bank of India Reproductive and Child Health Revised Estimate Rogi Kalyan Samiti (Patient Welfare Committee) Record of Proceedings Rupees State Health Budget Sub Health Center State Health Expenditure State Health Society Bihar State Program Management Unit Total Government Health Budget Total Government Health Expenditure Terms of Reference Treasury Route Budget Utilization Certificate United States Dollars Village Health and Nutrition Day Village Health, Sanitation and Nutrition Committee V Abbreviations

6 List of figures Figure 1: Resource tracking and management framework...2 Figure 2: Channels of Treasury and Society budgets for health Figure 3: State s own revenues and central support...14 Figure 4: Composition of central funds to Bihar Figure 5: Allocation of funds between sectors over time Figure 6: Bihar health budgets over time Figure 7: Budget allocations by levels of care...17 Figure 8: Resource allocation ratios...18 Figure 9: TGHE with NHM share Figure 10: Relative growth rate of health expenditure in Bihar Figure 11: Per capita expenditure on health Figure 12: Per capita expenditure on primary care Figure 13: Health expenditure (treasury route) trend by functions Figure 14: Expenditure by types of inputs: & Figure 15: Utilization of health budgets in Bihar: to Figure 16: Utilization rates by cost inputs & levels of care...27 Figure 17: NHM utilization by components Figure 18: Utilization of Mission Flexi Pool budget lines under NHM Figure 19: NHM MFP line item budget shares and utilization rates Figure 2A: Real growth in TGHE in Bihar study districts between & Figure 2B: Impact of NHM on primary care expenditure levels in Bihar study districts VI List of Figures

7 List of tables Table 1: Performance against select health indicators in EAG States: a comparative overview..5 Table 2: Bihar health sector performance against key impact indicators...6 Table 3: Coding of budget heads using the NHSRC Budget Tracking Toolkit... 7 Table 4: Sample units & tools for the qualitative component...8 Table 5: Type of health facilities as per population norms under the Indian Public Health Standards...9 Table 6: Sources and managers of funds in Bihar health system Table 7: Total health budget by source Table 8: Total government health budget and expenditure in Bihar Table 9: Health expenditure trends in Bihar Table 10: Primary care expenditure through different routes Table 11: Expenditure on drugs & pharmaceuticals Table 12: Utilization rates under NHM in Bihar Table 2A: TGHE in study districts in Bihar...37 Table 2B: NHM as a share of TGHE in study districts in Bihar...37 Table 2C: Year-on-year growth rate in TGHE (adjusted at prices)...37 Table 2D: Primary care as a share of TGHE in study districts in Bihar VII List of Tables

8 1. Introduction The performance of a country s health system is determined by a number of factors, including those related to system financing. Improvement in health of the population, financial risk protection and citizen satisfaction are three main goals often used to assess health system performance (Roberts et al., 2003). Developing strategies to meet those goals, enabling mid-course correction, and measuring health system performance rely on availability of sound data. To play an effective stewardship role in providing healthcare to its citizens, government needs evidence of how well health resources are managed (Powell-Jackson et al., 2007). Health resource tracking can be an integral part of governments efforts to strengthen the health system. The post-2015 development (Sustainable Development Goals) agenda includes a renewed focus on Universal Health Coverage (UHC) and more emphasis clearly on system-strengthening approach. Primary care, including preventive services and maternal and child health, forms the backbone of a cost-effective health system. Health resource tracking can be applied to government financing of primary health care as one contribution to strengthening health systems. Concept and purpose The Resource Tracking and Management (RTM) Project at Harvard T.H. Chan School of Public Health (HSPH) helps improve understanding of the financing of primary health care in Ethiopia and India and its effects on health system performance. This project was funded by a grant from the Bill and Melinda Gates Foundation. The grant includes the opportunity for learning from India, with a specific focus on Uttar Pradesh and Bihar. Following an initial rapid assessment (Berman et al, 2013) and consultation with India s Ministry of Health and Family Welfare and the Gates Foundation s India Office it was decided that grant activities would focus on the following questions: what is the total resource envelope for primary care (including state and central contributions); whether allocation of public resources for primary care activities is well aligned with resources needed; whether there is adequate utilization of the allocated funds; whether primary care spending is purchasing the right mix of inputs to assure delivery of maximum outputs; and eventually better targeting of primary care resources to benefit the poor. Scope The scope of this report is limited to public sector financing in the state of Bihar only, and does not include private sector or household expenditures on health. Two other reports, one on Uttar Pradesh and the other at the national level, have also been prepared under the RTM project. Financial scope We analyzed budget allocation and expenditure data for seven years (from financial year to ). The scope includes government financing through the budget / treasury route (funds pooled by the state from general taxation) and through other sources of central government support for health routed through the Department of Health and Family Welfare and the State Health Society, Bihar. Geographical scope Analysis at the state level is based on the consolidated financial and output data for the entire state of Bihar. In addition, six districts Bhagalpur, Darbhanga, East Champaran, Kishanganj, Patna and Sheohar were identified for a deeper dive to better understand expenditure trends and use of government funds. Resource tracking and management framework The study used the Resource Tracking and Management (RTM) project framework presented in Figure 1 below. 1 Introduction

9 Figure 1: Resource tracking and management framework Resource Mobilization Resource Allocation Resource Utilization Resource Productivity Resource Targeting What are the determinants of total resource envelope for health at national and sub-national levels? How are funds allocated to different programs and functions at national and sub-national levels? What factors determine the allocation to primary care? Are the allocated funds being utilized? What factors drive successful budget execution? What are the existing bottlenecks? How effectively are resources being translated into services? What are the effects on volume and quality? Are inputs benefiting the intended individuals and population? Is public spending reaching the poor? Key research questions Based on the above framework, the study looked at compositional changes in allocation and expenditure patterns across different levels of care with special focus on primary care and across cost inputs (human resource, operational costs, drugs and pharmaceuticals and capital projects). The study addressed the following questions: a. What are the total government health budgets and expenditures in Bihar and how are they distributed across cost categories, and across time? b. What is the priority accorded to the health sector vis-à-vis other social sectors as per budget allocations by the state government? c. What are the sources of financing for government spending and what are their shares? d. What is the trend of actual expenditure versus budget/allocation across time? e. What is the total government health expenditure as a percentage of the total government expenditure? What is the trend across time? How does it vary for Society and Treasury routes? f. What is the total government expenditure on primary care as a share of the total government expenditure on health? g. What is the per capita state government health expenditure over time? h. How much is being spent on drugs and pharmaceuticals over time? i. To what extent do budget allocations result in actual expenditures? Are there any differences in budget utilization between Treasury and Society routes? What are the factors that facilitate or inhibit utilization of funds? 2 Introduction

10 Organization of the Report The next section summarizes the performance of the health sector in Bihar, followed by the methodological approach we employed to understand the resource flows in Bihar. The complex budgeting process is laid out in section 4, followed by a detailed discussion of the results using the RTM framework. We end with the conclusion and some policy implications of the findings. 3 Introduction

11 2. Health Sector in Bihar The Bihar health sector has had only limited success in delivering equitable, accessible and quality health care services to its citizens, as evidenced by the state s weak health outcomes in comparison to other Indian states. The fiscal and political challenges in Bihar further exacerbate the inadequacy of the health care delivery system in delivering the necessary services. The system is impaired by unequal access to health care, high inequity, poor quality health care services, insufficient institutional capacity and human resources, and deficient public health spending associated with high out-of-pocket expenditures (GoB, 2012; GoI, 2007; NHM, 2013). The ratio of private spending on health care relative to public spending is second highest in India, and considering that one-third of Bihar s population is below the poverty line, the burden of out of pocket payments is catastrophic on those already below the poverty line and those on the brink of it (WorldBank, 2005; UNICEF). As an Empowered Action Group (EAG) 1 state, Bihar qualifies for additional central subsidies to strengthen its weak health outcomes and infrastructure. Unfortunately, the increased funding has not yet changed the picture of Bihar, one of the lowest performing states among its EAG peers. Demographic overview Bihar has a population of million (Census, 2011), which makes it the third most populous state in India, constituting approximately 8.6 percent of the country s total population. However, compared to the two largest states, Uttar Pradesh and Maharashtra, Bihar is much more densely populated at 1,102/km 2 as compared to 829/ km 2 and 365/km 2, respectively. Almost 90 percent of the population resides in rural areas with limited employment opportunities and little access to basic services. The population in Bihar is also expected to grow faster than the national average as it has the highest fertility rate in the country at 3.5 compared to the national average of 2.3. Healthcare delivery network Bihar s overall public health infrastructure network, comprises about 9,700 Sub Health Centers (SHC), 1,800 Primary Health Centers (PHC) and 70 Community Health Centers (CHC). Despite these numbers, Bihar only has 50 percent of the SHCs, 60 percent of the PHCs, and a mere 9 percent of the CHCs it needs based on the national government s supply to population norms (GoI, 2015). This significant deficit in basic health infrastructure in comparison with other states is one key contextual factor in Bihar. Human resources in health Similar to its deficit in physical infrastructure, Bihar has a significant gap in human resources for health compared to national norms. According to Rural Health Statistics 2015 (GoI, 2015), the greatest shortfalls exist among physicians and specialists across the state at 75 percent or more while deficits of male health workers at SHCs and pharmacists at PHCs and CHCs exceed 89 percent. Further, female and male health assistants are in short supply at 80 and 97 percent respectively. Fortunately, Bihar benefits from a considerable surplus of female health workers compared to male health workers. Human resources for health remain probably the largest supply side barrier to gaining sufficient access to equitable and quality health care. 1 Eight socioeconomically backward states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttaranchal and Uttar Pradesh, referred to as the Empowered Action Group (EAG) states, lag behind in the demographic transition and have the highest infant mortality rates in the country. 4 Health Sector in Bihar

12 Health sector outputs and performance in Bihar The most recent Annual Health Survey highlights that Bihar has the lowest usage of any method of family planning (41.2 percent) amongst Indian states. Full antenatal checkup, though not the lowest, is only 7.8 percent in Bihar as compared to 27.8 percent in Odisha. Institutional delivery in Bihar is 55.4 percent compared to a high of 82.6 percent in Madhya Pradesh. Only 40.9 percent of the pregnant women in Bihar received financial benefits under the Janani Suraksha Yojana (JSY), the flagship scheme of the Government of India in contrast to 72.9 percent in Madhya Pradesh. The percentage of newborns checked within 24 hours of birth (61.9 percent) and the percentage of children breastfed within 1 hour of birth (37 percent) is the lowest observed among all EAG states. Between and , institutional deliveries declined by 9 percent and male sterilizations by 74 percent. Bihar has an average IMR (49) and NNMR (32) but the highest MMR (274) among the EAG states. See Table 1. Table 1: Performance of select health indicators in EAG States: a comparative overview No. Indicators Bihar Chhatisgarh Jharkhand Madhya Pradesh Odisha Rajasthan UP Uttarakhand HEALTH INDICATORS 1 Total Fertility Rate Current usage of any method of family planning Share of sterilization in any 3 modern method of family Female 84.1% 86.5% 76.7% 82% 70.8% 76% 48.9% 50.8% Male 0.8% 1.9% 1.1% 2% 0.6% 1% 0.8% 2.4% 4 Women receiving full antenatal check-up 7.8% 22.5% 13.6% 16.2% 27.8% 9.5% 6.8% 17.1% 5 Institutional delivery 55.4% 39.5% 46.2% 82.6% 80.8% 78% 56.7% 58.3% 6 Mothers who availed financial assistance under JSY 40.9% 34% 23.9% 72.9% 70.3% 59.5% 36.4% 33.8% 7 Pregnancy resulting in abortion 4.5% 1.4% 5.4% 3.2% 6.7% 3.3% 7.1% 6.5% 8 Mothers not receiving any post natal care 19.4% 22% 26.1% 14.1% 12.1% 16.8% 17.9% 30.1% 9 Percentage of new born checked within 24 hours of birth 61.9% 65.9% 64.8% 79.1% 81.7% 76.3% 77.7% 62.9% 10 Fully immunized children (12-23 months) 69.9% 74.9% 69.9% 66.4% 68.8% 74.2% 52.7% 79.6% 11 Children (6-35 months) given Vitamin A dose 56.2% 68.3% 58.6% 58.1% 68.6% 74.2% 40.8% 57.1% 12 Percentage of children breastfed within 1 hour of birth 37% 66.3% 43.3% 66.8% 78.7% 54.1% 39.4% 65.1% 13 Crude Birth Rate Crude Death Rate Under-5 Mortality Rate Maternal Mortality Ratio Infant Mortality Rate Neo-natal Mortality Rate ECONOMIC INDICATORS 19 Gross State Domestic Product 2,936,159 1,656,412 1,516,547 3,612,703 2,512,205 4,701,784 7,803,986 1,082,498 (GSDP) in million Rs 20 GSDP per capita 29,652 67,374 47,534 49,256 61,116 68,248 38, ,348 5 Health Sector in Bihar

13 Despite its poor performance relative to other EAG states, Bihar s health indicators are in fact gradually improving over time. From to , the percentage of women who received 3 ANC check-ups to total ANC registrations has increased by 35 percent. In the same time period there is a 34 percent rise in the percentage of women receiving post-partum check-up within 48 hours of delivery and a 64 percent reduction in the percentage of newborns weighing less than 2.5 kilograms to the total newborns weighed at birth 2. Improvements in Bihar s key impact indicators are illustrated in Table 2. Table 2: Bihar health sector performance against key impact indicators No. Impact Indicators Crude Birth Rate Crude Death Rate Infant Mortality Rate Neo-natal Mortality Rate Under-5 Mortality Rate Maternal Mortality Ratio Source: Annual Health Survey Bulletin, , , , Registrar General of India 2 Based on analysis of HMIS Standard Reports for Bihar from to , accessed on 20 June Health Sector in Bihar

14 3. Methodology Overview of the approach The study was primarily based on secondary data (budget, allocations and expenditure, outputs) in addition to some qualitative analysis. A detailed list of data sources is included in Annex 1. Financial data analyses State and district financial data were disaggregated into levels of care (primary, secondary, tertiary, medical education and administration) based on the categories developed by the National Health Systems Resource Center (NHSRC) in the Budget Tracking Toolkit. Table 3 below depicts how the budget heads were coded. The objects of expenditure in the State Budget were classified into the five cost input categories: Human Resources, Operating Expenses, Capital Projects, Drugs & Pharmaceuticals and Others. To ensure uniform cost category-wise analysis across budget sources, we categorized the NHM expenditure data into the same five cost categories. Table 3: Coding of budget heads using the NHSRC Budget Tracking Toolkit Budget code Hierarchy Budget Lines/ Heads Example with Code Type of care Level 1 Major Head Medical and Public Health Revenue Expenditure Head (2210) Level 2 Sub-major Head Public Health Head (06) Level 3 Minor Head Prevention and Control of Diseases (101) Level 4 Sub-minor head National TB Program (04) PRIMARY CARE Level 5 Detailed Head Drugs and Medicines (60) Assumptions: a. The Budget Tracking Toolkit of the National Health Systems Resource Center (NHSRC) was used for classifying budgets and expenditure into levels of care. Since budget codes are not uniform across states, wherever there was a conflict between category to be assigned to a particular budget code as per the NHSRC toolkit and the description of the budget line, we used the state s budget line description to assign the level of care. b. For the study purposes, the entire NHM budget was considered as primary health care. The 38 districts of Bihar were grouped into High-Priority districts and Non-High-Priority districts. Two criteria were chosen to rank the performance of these districts. The criteria were percentage of institutional deliveries and percentage of caesarean sections, to reflect the efficacy of the public health system in attracting and serving the people with quality healthcare. Six districts were selected. Bhagalpur, best performing non-high Priority district, Darbhanga, worst performing non-high Priority district, Sheohar, worst performing High Priority district, Kishanganj, one of the best performing High Priority district, 7 Methodology

15 Patna, the state capital and an average performing non-high Priority district, East Champaran, among the worst performing High Priority district with special focus given by the State Health Society Bihar (SHSB). Details on health expenditures incurred by these districts are included in Annex 2. A qualitative study was undertaken in the same districts to understand the context and perceptions of beneficiaries and stakeholders on issues around equity, efficiency and quality of health care services. The two units at each level district, block, Additional Primary Health Center (APHC), SHC and Village Health Sanitation and Nutrition Committees (VHSNC) were selected on the basis of best and least performing units in terms of both expenditure and coverage indicators. Table 4 below presents the number of sample units studied and the type of qualitative study tool used to gather insights. Table 4: Sample units & tools for the qualitative component Levels Units Sample units Study Tool Department of Finance and Planning 01 In-depth Interview (IDI) State Directorate of Health & Family Welfare 01 IDI State Health Society 01 IDI District District Health Society 06 IDI Block PHC 12 IDI VHSNC 12 Focus Group Discussions (FGD) Village ASHA 12 FGD Women s groups 12 FGD The IDIs and FGDs were conducted by trained field investigators, and coordinated by a local Non-Government Organization (NGO) working on health and development issues in rural Bihar. The tools were developed and tested in Patna district in August The dimensions and issues covered in the study were monitored closely and after data saturation was observed, further FGDs and IDIs, although planned, were not carried out. Limitations 1. Limitations in financial data related to treasury funds For treasury financial data the study scope was limited to the Department of Health and Family Welfare. Health related budgets and expenditure in non-health ministries, if any, were not included. 2. Limitations in financial data related to NHM funds The financial management system under the NHM is structured program-wise, for example Mission Flexi Pool, RCH Flexi Pool etc. making it difficult to estimate expenditures by types of inputs. Financial Management Reports (FMRs) under the NHM are the only source for disaggregating budget and expenditure data into different cost or input categories. The mapping of the FMR to cost categories is limited to only 2 financial years and This was not possible for previous years because of quality and availability of data in the FMRs. Hence for analyzing expenditure by cost inputs, shares of cost inputs calculated based on FMR for have been used for all previous years. 8 Methodology

16 Definitions Types of health facilities Table 5: Type of health facilities as per population norms under the Indian Public Health Standards Type of Health Facility Population norms Basic features SHC PHC CHC bedded hospital bedded hospital bedded hospital bedded hospital Source: MoHFW, Government of India Village level: 5,000 population in plain areas and for every 3,000 population in hilly/tribal/desert areas. Block Level: 30,000 population in plain areas and 20,000 in hilly, tribal, or difficult areas. Block Level: 4 PHCs are included under each CHC thus catering to a population of approximately 80,000 in tribal/hilly areas and a population of 120,000 in the plains. Subdivision Hospital: It caters to about 5-6 lakh ( million) people. Depending upon size of a sub-division, a sub-divisional hospital can be 31 to 50 or 51 to 100 bedded. District Hospital: Every district is expected to have a district hospital linked with the public hospitals/ health centres down below the district such as Sub-district/Sub-divisional hospitals, CHCs, PHCs and SHCs. What are Budget Estimates, Revised Estimates and Actuals? 3,4 Staffed by one male multipurpose worker (MPW/M) and one female multipurpose worker (MPW/F) or ANM. With 4-6 indoor/observation beds, it is staffed by a Medical Officer and acts as a referral unit for 6 sub-centres and refers out cases to higher order public hospitals. 30-bedded hospital providing specialist care in Medicine, Obstetrics and Gynaecology, Surgery and Paediatrics with the help of regular appointed medical experts. It is the first referral unit for the PHCs falling under its area. It has an important role to play as First Referral Units for PHCs and CHCs in providing emergency obstetrics care and neonatal care. It fills the gap between the block level hospitals and the district hospitals. District hospitals are an essential component of the district health system and functions as a secondary level of health care which provides curative, preventive and promotive health care services to the people in the district. Budget Estimates - Budget Estimate is the initial planned spending amount announced before the beginning of the fiscal year. It is based on advance estimates of receipts and expenditure of a financial year. Revised Estimate - Revised estimate is a revision to the budget estimate issued approximately in the 3 rd quarter of the fiscal year reflecting adjustments in revenue estimates and spending estimates. 3 Budget Manual, Budget Division, Dept of Economic Affairs, Ministry of Finance, Government of India, How to Read the Union Budget, PRS Legislative Research, Center for Policy Research, Methodology

17 Actual expenditures are the final audited amounts spent under different heads and may exceed (or fall short of) the Revised Estimates. Since the actual expenditure can only be assessed once the financial year is over and final accounts have been prepared and audited, the Actual expenditures presented in the budget papers are for the earlier financial year. Fund flow routes: - Treasury and Society Treasury Route: Refers to the flow of all funds, including funds from the state government (own tax revenue) and the central government grants, which are routed through and spent directly out of the State Treasury. Society Route: Refers to the flow of funds, including funds from the state government and the central government grants that are routed through and spent directly out of the State Health Society. The state treasury has little oversight on society route spending. 10 Methodology

18 4. Budgeting and fund flow processes In Bihar, the treasury route health budget has largely been based on historical budgeting with little regard for actual cost of delivering intended services or resource productivity. NHM has been an important addition to state resources with a focus on strengthening primary health care. However, for NHM the bottom up planning intended to capture local realities and increase innovation and prioritize health appropriately is hampered by low planning and budgeting capacity to develop credible plans and budgets. Process of budgeting and allocations under the treasury route Bihar has more than 700 Drawing & Disbursing Officers (DDOs) at different levels under the Department of Health and Family Welfare (DoHFW). Budget preparation under the treasury route begins with the DDOs at the block level preparing their estimates for the upcoming financial year, which are then forwarded to district level officers, where the block budgets are compiled, consolidated and submitted to the finance unit of the DoHFW at the state level. At the state level these estimates are reviewed, and aggregated for the approval of the Principal Secretary of the Department and then on to the Finance Department for negotiations. The health (sector) budgets are finalized for approval based on the overall resource envelope expected to be available for the entire state for that fiscal year. All department budgets are compiled by the finance department to prepare the overall state budget with the involvement of the Accountant General, following which it is presented in the State Legislative Assembly for legislative scrutiny and approval. Past expenditure trends, existing commitments and obligations are factored in and an incremental approach is followed to arrive at the estimates at all level. There is extremely limited evidence of need based planning and budgeting under the treasury route. Once approved, the Finance Department makes appropriate allocations for the DoHFW and the districts. Planning and budgeting under the NHM The process of planning, budgeting and approval under NHM takes about six to eight months. Based on overall resource envelope communicated by the Government of India to the state and the planning guidelines issued, the process is led by the State Health Society Bihar (SHSB). The District Program Management Unit seeks inputs from each of the blocks to prepare the District Action Plan and the budget. Previous year s progress and the gaps form the basis for planning for the year ahead. District Action Plans are finally approved by the respective District Health Societies and shared with the SHSB for further action. SHSB reviews and negotiates the respective plans and budgets with the districts and includes state level activities to consolidate and finalize the State Project Implementation Plan (SPIP). This SPIP is then sent to the NHM unit in Government of India. After detailed review, a coordination meeting is held between the Government of India (GoI) and the state NHM team for final presentation, discussions and approval. Typically, between May and July each year, GoI sends the Record of Proceedings (ROP) to the states, communicating the approval decision and related details. The ROP contains the overall allocation for the year and the budget approved including details of all approvals awarded by the GoI for each proposed budget line, based on which the SHSB determines the final allocations for the districts for that year. Later in the year, SHSB may submit supplementary plans as per emerging need to the GoI for approval. All such subsequent approvals are communicated to the SHSB through Supplementary Record of Proceedings. Budget and expenditure flows at all levels The channels of budget and expenditure flows across all levels of healthcare in the public health system, is depicted in the Figure 2 below. 11 Budgeting and fund flow processes

19 Figure 2: Channels of Treasury and Society budgets for health Central Revenue Pool State share of Central Revenues State Revenue Pool Central Treasury State Treasury CSS/CSP/NHM MoHFW State Health Department District (CMO) LEGENDS Block (BMO) Treasury Budget NHM/Off Budget (Society route) Offices responsible for Treasury Budget Committees responsible for NHM (Society) Budget Secondary Healthcare Facilities Primary Healthcare Facilities Health Programs District Hospital Sub Division Hospital CHC PHC Sub Centre Centrally administered Hospitals and Health Programs State Health Society District Health Society Block Health Society VHSC Employing the National Health Accounts (NHA) matrix, is the best way to understand what are the sources of funds and who manages them. We have developed a simplistic NHA matrix for the last two years for Bihar: Table 6: Sources and managers of funds in Bihar health system (in million Rs) NHA Table for NHA Table for Sources Financing Agents Total Percent Sources Financing Agents State NHM State NHM Total Percent State 14,042 3,986 18, % State 15,609 3,636 19, % Center 2,780 9,603 12, % Center 3,121 11,670 14, % Total 16,822 13,589 30,411 Total 18,730 15,306 34,036 Percent 55.32% 44.68% Percent 55.03% 44.97% Note: Central revenue grants to the state are captured as a state source. We see that 45 percent of the funds are managed by the NHM/SHSB thereby making it an almost equal custodian along with the state machinery with the responsibility of ensuring optimal utilization of available resources. 12 Budgeting and fund flow processes

20 Fund channels and flow under NHM Until , the central funding of NHM used to flow to the states through two channels. Most of the central support was routed directly to the SHSB and a small portion of the approved budget earmarked for Infrastructure and Maintenance component was directly transferred to the State through the treasury route. As a part of streamlining channels of funding and ensuring greater oversight by the state, Government of India changed its policy in and now all central support goes directly to the treasury account of the state from where funds earmarked for the SHSB are transferred by the state to the SHSB. Some state level officers anticipate delays in release of funds from the Treasury to the SHSB. This concern is not unfounded as the 93 rd Parliamentary Standing Committee for the Department of Health and Family Welfare has already recorded significant delays in onward transfer of central funds from the state treasuries to the Societies across states (GOI, 2016). 13 Budgeting and fund flow processes

21 5.Results Resource mobilization trends and analysis Fiscal space within Bihar Bihar has had a sluggish economy since independence. However, in recent years its economy is among the fastest growing state economies in India with the rate of growth higher than the national average. In Bihar s GSDP is estimated at Rs 4,022 billion, growing faster than Maharashtra, Punjab, Tamil Nadu and Karnataka. Despite the GSDP at current prices growing at an average rate of approximately 18 percent per annum (real growth 9 percent) in the last ten years, the per capita income at Rs. 39,623, is only about 45 percent of the national average in As seen in Figure 3, Bihar s capacity to generate its own revenue (tax and non-tax revenue) has increased eight times and central government s support increased five times in the same time period. While this growth in generating revenue for the state appears to be impressive, Bihar s ability to expand its tax base is very limited. The Annual Bihar Economic Survey reveals that the state s tax-to GSDP ratio was less than 6 percent in the year It has remained stagnant for the last 5 years, when in it was 4.97 percent (GoB, 2016). Figure 3: State s own revenues and central support Contributions of state's own revenue and central support to Bihar (in billion Rs) States own revenues Center support (RE) (BE) Bihar remains heavily dependent on central funds. Central funds 5 as a share of total revenue (State and Central combined) receipts was at its peak of 80 percent in and and has gradually declined to 67 percent in (Budget Estimates). The mix of central support, however, has changed following the 14 th Finance Commission (FC) recommendations, the Central transfers in the form of sector specific grants have reduced by about 37 percent between and (BE), but the share in central taxes is up by 33 percent (see Figure 4). 5 Including share in central taxes and other grants from the center 14 Results

22 Figure 4: Composition of central funds to Bihar Central grants and share of central taxes to Bihar (in billion Rs) Central grant Share of central taxes (RE) (BE) Following the 14 th FC recommendations and the fiscal devolution, the central government has fewer resources to increase its direct investment in social sectors in the states. The new arrangement now puts the onus on the states to decide whether or not to prioritize the health sector. One year since the recommendations were implemented, some of the less developed states like Chattisgarh, Jharkhand, Madhya Pradesh, and Rajasthan have actually prioritized social sectors. However, in Bihar, the levels of investment in social sectors has reduced (Kapur et al., 2016). Analysis of data clearly reveals that the state has significantly deprioritized social sector 6 investments (from 49 percent in to 42 percent in ). See Figure 5. Only time will tell whether this is just a chance occurrence or a conscious lack of political prioritization of health. FY are Budget Estimates, whereas for all other years, the values are Revised Estimates. Figure 5: Allocation of funds across sectors in Bihar Allocations of funds across sector over time Social services General services Residual (Economic + Grants) 14% 20% 19% 21% 21% 22% 24% 24% 23% 22% 25% 48% 43% 42% 34% 37% 36% 34% 33% 32% 29% 33% 38% 37% 39% 45% 42% 43% 42% 43% 44% 49% 42% RE RE RE RE RE RE RE RE RE RE BE 6 Social services include expenditure education, sports, art & culture, medical and health, family welfare, water supply & sanitation, housing, urban development, welfare for scheduled castes & tribes, nutrition, etc.; General Services (non-development) include fiscal and administrative services, lotteries, etc.; Economic Services include agriculture & allied activities, rural development, special area program, irrigation and flood control, energy (including power), industry and minerals, transport, science & technology, ports, tourism, etc.; Grants refer to Grants from Government of India which are allocated under State Plan Schemes, Central Plan Schemes, Special Plan Schemes, and non-plan Grants. 15 Results

23 Senior state officials overseeing the state financing and planning functions have raised concerns about the central government s insistence, following the 14 th FC recommendations, on an equal contribution between state and center to development and plan expenditures. They noted in key informant interviews that a higher contribution is not feasible for a resource-starved state like Bihar. The state, they argue, should be granted a special category status, which would imply ratio of center-state funds. In the current circumstances, the state cannot mobilize any additional resources to health without compromising some other sectors. Total health budget by sources Joint efforts of the state and the central government have ensured that the Total Government Health Budget (TGHB) in Bihar has more than doubled between and in nominal terms. The TGHB is was Rs. 47,401 million (Rs 23,918 million at prices), approximately 59 percent of which was contributed by the state. Refer to Table 7 for details. Table 7: Total government health budget by source Source Nominal/Real State Government Central Government TGHB Nominal Nominal Nominal 13,836 10,920 24,755 14,437 13,345 27,782 16,305 14,061 30,366 22,912 14,838 37,750 24,711 19,355 44,066 27,787 19,613 47,401 Real Real Real 10,445 8,244 18,689 10,027 9,269 19,296 10,427 8,992 19,419 13,521 8,756 22,277 13,374 10,475 23,849 14,021 9,897 23,918 Central contribution to total government health budget 44% 48% 46% 39% 44% 41% (All figures are in million Rupees, Real values are adjusted at prices A large part of the center s contribution to Bihar s health budgets has come from the National Health Mission (NHM). The share of NHM (state and center contributions) in the TGHB has ranged between 36 percent and 46 percent during the study years, with the NHM s share slightly dipping to 43 percent in Figure 6 below presents the details. Figure 6: Bihar health budgets over time Bihar health budget (in Rs million) State health budget (excluding NHM) NHM (all routes) 13,452 20,371 20,169 9,786 12,547 12,739 8,493 10,682 14,969 15,235 17,627 24,298 23,695 27, Results

24 Key messages Increases in health budgets (center and state) have not kept pace with the growing economy despite sharp increases in GSDP. On the contrary, resource mobilization for health as a share of GSDP has declined in the most recent two years. Total health budget has almost doubled between and , with the state share increasing two times and center s share increasing by 1.8 times during the same period. Current levels of government budget for health are likely to be insufficient to significantly reduce out-ofpocket expenditures. In 1 year since the 14 FC recommendations, Bihar s allocation to social sectors has decreased from 49 percent to 42 percent of its total budget. Resource allocation trends and analysis Allocations by levels of care The methodology to estimate primary care expenditures uses the budget-tracking tool developed by the National Health System Resource Center (NHSRC). Each budget item at the sub-minor treasury budget code level was coded to estimate the allocations by level of care primary, secondary and tertiary. Normative estimates of the costing of primary care package of services range from $32 per capita per year to $67 per capita per year (Deolalikar et al., 2008; GoI, 2005; WHO, 2001; World Bank, 1995; Prinja et al., 2012). In Bihar had an allocation of only Rs 326 per capita for primary care (approximately US$ 5). Total government budget allocation (State Treasury and NHM) for primary care increased from Rs 13,325 million in to Rs. 32,695 million in The state allocations prioritize primary care, with an average allocation of approximately 70 percent of its budget. Despite the substantial share, the per capita amount remains inadequate. Figure 7 presents the allocation to primary care over time. Figure 7: Budget allocation by levels of care Budget allocation by levels of care 80% 70% 69% 70% 73% 74% 67% 71% 69% 60% 50% 40% 30% 20% 10% 0% Primary care Secondary care Tertiary care Medical Education Administration Plan versus Non-plan and Capital versus Revenue allocations Prior to 2014, the Planning Commission formulated the five-year plans and led decision-making on central allocations to states from development funds. In theory, the plan funds represented new projects/initiatives, capital 17 Results

25 projects etc. The non-plan funds in theory constituted routine funding of continued recurrent expenditures. However, in actual practice in the health sector this distinction has not been applied systematically. For example, the Infrastructure and Maintenance grants, which are effectively the former family welfare allocations, remained plan for decades, even though they are largely recurrent expenditures for long-existing facilities. The Planning Commission s somewhat unstructured growth, and the political influences exerted over it by the ruling parties, have resulted in complex center and state financing arrangements particularly in the health sector (Prakash et al., 2014). It is useful to understand the allocation of both plan and non-plan and capital and revenue classifications. The trends in resource allocation through plan and non-plan and capital and revenue classifications are presented in Figure 8. Figure 8: Resource allocation ratios Allocation as share of treasury route budget (TRB) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Plan as a share of TRB 25% 23% 21% 28% 31% 33% 33% Non-plan as a share of TRB 75% 77% 79% 72% 69% 67% 67% Capital as a share of TRB 10% 10% 8% 9% 15% 18% 19% Revenue as a share of TRB 90% 90% 92% 91% 85% 82% 81% Plan as a share of TRB Non-plan as a share of TRB Capital as a share of TRB Revenue as a share of TRB Key messages Allocation for primary care ranges between 67 and 74 percent during the study years, largely due to increased NHM allocations. Primary care allocation at Rs 326 per capita is one of the lowest in the country and far below the normative estimates of what is needed to support a good package of primary care services. This low level of investment is insufficient to finance a substantive program of good quality services for the population. Health expenditure analysis Overall trends Paradoxically, low allocations to health in Bihar are also accompanied by under spending of available funds. Health expenditure trends in Bihar between and present a story of very low actual spending - combining low budgets with underuse. A brief look at Table 8 below highlights how poor utilization further shrinks the health budget. On an average almost 25 percent of the budget is unused. Table 9 presents some key health expenditure indicators over time. A detailed look at the utilization of funds is included in the subsequent section that explores reasons for underutilization. 18 Results

26 Table 8: Total Government Health Budget and Expenditure in Bihar Year Total Budget (RE) 19,174 24,755 27,782 30,366 37,750 44,066 47,401 Total Expenditure (Accounts) 14,720 19,439 18,677 23,028 26,898 30,411 34,036 Ratio of Expenditure to Budget 77% 79% 67% 76% 71% 69% 72% Bihar s health expenditure trends over the last 7 years is presented in Table 9 below. Table 9: Health expenditure trends in Bihar No. Indicators State 1 Population (in millions) Population Growth (%) GSDP (in Rs billion) 1,137 1,423 1,629 2,036 2,433 2,936 3,437 4 GSDP growth rate (%) Total Government Health Expenditure (TGHE) 5 TGHE in Rs. millions (nominal) 14,720 19,439 18,677 23,028 26,898 30,411 34,036 6 TGHE in Rs. millions (real, at prices) 13,645 17,143 15,407 17,384 18,682 19,448 20,085 7 Total expenditure under NHM (nominal) Rs million 3,826 10,927 7,839 14,186 11,074 13,589 15,306 8 NHM's share in TGHE (%) Center's share in TGHE Health expenditure through treasury as a share of total state expenditure (%) TGHE as a share of total state expenditure (%) State health expenditure as a share of GSDP (%) TGHE as a share of GSDP (%) Annual per capita TGHE (in nominal Rs.) Annual per capita TGHE (in Rs., Real at prices) Government Primary Care Expenditure (GPCE) 16 GPCE Rs million 10,273 14,109 12,603 17,049 17,586 20,278 22, GPCE (Real) Rs million 8,474 10,651 8,754 10,902 10,378 10,975 11, Per capita GPCE (Nominal) in Rs Per capita GPCE (Real) in Rs Others 20 Capital expenditure as a share of health expenditure through the treasury route (%) Drugs & pharmaceutical expenditure as a share of TGHE (%) Per capita expenditure on drugs & pharmaceuticals (in nominal Rs.) The TGHE in is Rs 34,036 million, a nominal 2.3 fold increase in the seven years and an increase of 1.5 times in real terms. During the same time period the role of the NHM has increased substantially, for the last three years NHM contributed percent of the TGHE. NHM s share was 26 percent in See Figure Results

27 Figure 9: Bihar total health expenditure (nominal, in Rs million) Total Government Health Expenditure (nominal, Rs. million) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-26% 42% 41% 45% 45% 56% 62% Health Expenditure (excluding NHM) NHM Total 120% 100% 80% 60% 40% 20% 0% Another concern is the erratic growth rate of TGHE which reflects year-to-year variations in both center and state spending on health in Bihar. Such an erratic growth rate reflects poor planning and budgeting. See Figure 10. Figure 10: Relative growth rate of health expenditure in Bihar 250% Relative growth rate Relative of Government growth Health rate of Expenditure TGHE in Bihar TGHE in Bihar 200% 150% 100% 50% 0% -50% State share in TGHE -27% 35% -31% 112% 11% 7% Central share in TGHE 234% -33% 105% -31% 16% 19% TGHE 32% -4% 23% 17% 13% 12% State share in TGHE Central share in TGHE TGHE Figure 11 presents the per capita expenditure on health in Bihar from to As noted earlier the total amount is very low and reflects further reduction due to underutilization of budgeted funds. Bihar also has a high fertility rate of 3.5, which is well above the national average of 2.3. This further erodes per capita spending levels. In real terms in , the per capita expenditure (adjusted at prices) is only Rs. 200, only a modest change from the earlier period. 20 Results

28 Figure 11: Per capita TGHE Per capita TGHE (in Rs.) Per capita State Health Expenditure Per capita GoI Health Expenditure Per capita Total Government Health Expenditure In Rs. Key messages: In nominal terms the TGHE has grown by 2.31 times (1.5 times in real terms) Center s contribution has increased substantially by 4 times, in contrast with the state share in expenditure, which grew by only 1.7 times despite rapid GSDP growth. This raises the question as to whether growing central funding is enabling the state to spend less of its own resources on health. TGHE per capita is among the lowest in the country at Rs 339 nominal. Rapid population growth in Bihar further erodes the growth in per capita amounts relative to other states. Expenditure by levels of care with focus on primary care Primary care as a share of TGHE has ranged between 65 percent and 74 percent during the study years and is experiencing a gradual declining trend the last 3 years. Through the treasury route, the share of primary care expenditure was 68 percent in and has gradually declined to 54 percent in A substantial portion of the treasury expenditure pays for salaries, and this decline in state/treasury funding may exacerbate the problem of shortage of human resources. NHM has made a strong positive impact on the total primary care expenditure in the state. A complete picture of primary care expenditure is presented in Table 10 Table 10: Primary care expenditure through different routes Routes of primary care expenditure Primary care expenditure through the Treasury route* 7,687 6,421 6,855 9,735 8,997 9,865 10,317 Primary care expenditure through State Health Society 2,586 7,688 5,748 7,313 8,589 10,414 11,936 Total primary care expenditure 10,273 14,109 12,603 17,049 17,586 20,278 22,253 Primary care as a share of TGHE 70% 73% 67% 74% 65% 67% 65% * excluding state share for NHM Though in nominal terms the per capita primary care expenditure doubled between and (Rs 222), it has plateaued since with no discernable increase in real terms. The real increase is merely 22 percent in seven years. See Figure Results

29 Figure 12: Per capita expenditure on primary care Per capita expenditure on primary care in Bihar Nominal Real Since our study assumes NHM to be 100 percent primary care, we analyzed only the treasury expenditure by health care functions. Analysis reveals a steady growth in the shares of expenditure for secondary care, tertiary care and medical education, with the share of medical education higher in than the last seven years mean share. See Figure 13. Figure 13: Health expenditure trend by functions (treasury route only) Expenditure trend by functions 2007 to 2014 (Treasury route only) 80% 70% 60% 68% 59% 54% 50% 40% 30% 20% 10% 0% 18% 12% 13% 15% 11% 13% 9% 11% 9% 3% 3% 2% Primary care Secondary care Tertiary care Medical Education Administration Mean ( ) Investments in secondary care and medical education have increased over time; however, they have been made at the expense of primary care, as proportion of primary care spending through the treasury route has declined. In a health system where, based on the National Health Accounts estimates, nationally 64.2 percent of the healthcare expenditure is out-of-pocket, declining government primary care expenditure may have impoverishing and catastrophic consequences (MoHFW, 2016). In Bihar, based on the National Sample Survey, the study revealed that 6 percent of all households in Bihar fell below the poverty line due to catastrophic health care expenditure and that a large part of the out of pocket spending was primary care related (Berman et al., 2010). 22 Results

30 Such low expenditure levels in Bihar cannot help but have a direct impact on the quality and accessibility of services particularly affecting the most vulnerable beneficiaries. Human resource shortage, especially of nursing staff and specialists; lack of training; gaps in needed infrastructure; and shortages of medicines and instruments and labor room essentials are some of the observed gaps at the facility level that contribute to poor health care performance (BTAST, 2016). Anecdotal evidence emerging from FGDs is consistent with the BTAST DFID study, where women at the village level perceive that though cleanliness in health centers has improved, other indicators like time spent by doctors, waiting time at the center, availability of medicines, referral transport facilities still leave much to be desired, and that the overall quality of care continues to be poor. Key messages: Per capita expenditure on primary care has doubled to Rs 222 (nominal) in as compared to Real per capita expenditure on primary care is Rs 112 in rupees, only a modest increase from the previous period. Primary care as a share of TGHE has ranged between 65 and 74 percent and is experiencing a gradual declining trend with the share in being 65 percent. This overall decline can be partially contributed to slowing down of state s expenditures on primary care from its own resources. Expenditure by type of inputs The state treasury spends most of its funds on human resources, whereas the NHM spends most of its money on program implementation 7. In addition, NHM also augments the state by supporting the human resource gaps. See Figure 14 for details. Figure 14: Expenditure by types of inputs: & Expenditure by inputs & % 60% 50% 62% 53% 65% 56% 40% 30% 20% 10% 0% 2% 25% 24% 22% 18% 14% 14% 5% 7% 9% 5% 3% 5% 7% 2% State NHM State NHM 2% Human Resource Drugs & Pharmaceuticals Others (Treasury) / Program Implementation (NHM) Operating Expenses Capital projects One area where NHM has made a significant contribution is access to medicines. It has contributed to approximately 28 percent of the expenditure on drugs and pharmaceuticals. Despite this substantial contribution from NHM, 7 Program costs for NHM typically include: Post service trainings medical and para-medical staff, provision of Special Health care services including medicines (Reproductive tract infection, sexually transmitted diseases), Rural institutional deliveries, ASHA incentives, Compensation for male and female sterilization, etc. 23 Results

31 the per capita annual expenditure on medicines is merely Rs 19. Table 11 provides a complete picture related to expenditure on drugs and pharmaceuticals. Table 11: Expenditure on drugs & pharmaceuticals Expenditure on Drugs & pharmaceuticals Through Treasury route (in million Rs) ,142 1,249 1,350 Through NHM (in million Rs) Total expenditure (in million Rs) 432 1,193 1,030 1,355 1,556 1,720 1,897 Total annual per capita expenditure (in Rs) NHM's share in total expenditure 14% 40% 26% 34% 27% 27% 29% Proportion of TGHE 3% 6% 6% 6% 6% 6% 6% The Bihar Medical Services & Infrastructure Corporation Limited, incorporated in 2010, is the sole procurement and distribution agency for medicines in the state. For government services, pharmaceutical supply often suffers from drug shortages; routine delays; inadequacy of funding, juxtaposed with underutilization of the budgeted funds; and irrational use of drugs (Selvaraj et al., 2010; Bose, 2015). Our analysis further confirms low allocation and expenditure on drugs and pharmaceuticals. It is ironic that the Indian pharmaceutical industry ranks 10 th in the world in terms of value and 3 rd in terms of volume of drugs, but its own citizens particularly in poor states like Bihar have very limited access to affordable quality medicines (McKinsey, 2014). Weak procurement systems combined with low government spending on drugs limit access to medicines for citizens of Bihar. Bihar s cash and carry model 8, because of its decentralized payment structures and uncertain payment schedules, perpetrates a system where the suppliers hedge their risks of delayed or non-payment by quoting higher prices for drugs on the tender, thereby artificially inflating the cost of procuring these drugs. In addition, the procurement records are still not fully digitized, leading to inefficiency in forecasting, distribution and consumption of supplies (Chokshi et al., 2015). The state has officially committed to move away from its Cash-and-Carry (decentralized payments and supply chain) system to Bihar Medical Equipment and Drugs System (BMEDS), much like the system in Tamil Nadu (The Tamil Nadu Medical Services Corporation or TNMSC). The state has also adopted an Essential Drug List (EDL) at the primary and secondary level government health facilities. However, as mentioned earlier shortages and stockouts of antibiotics and injectables continue even among EDL items. A recent study compared Tamil Nadu and Bihar based on the National Sample Survey (NSS), 71 st round, found that availability of drugs in public health facilities in Bihar, on average ranged between percent at best, whereas drug availability was percent in Tamil Nadu (Selvaraj et al., 2010). Unsurprisingly, this level of shortages resulted in significant out of pocket expenditures on drugs in Bihar almost Rs 600 per outpatient episode, where as it is Rs. 450 in Tamil Nadu. The study also revealed that only 1 percent of the patients accessing outpatient care in government hospitals in Bihar received free medicines as compared to 23 percent in Tamil Nadu (Selvaraj and Nabar, 2010). The shortages affecting antibiotics and injectables may be related to the issue of irrational prescription of drugs. The same study based on the NSS -71 revealed that the percent of healthcare encounters where injections were prescribed were three-and-half times higher in Bihar (4.9 percent) as compared to Tamil Nadu (1.4 percent). Another qualitative study conducted by the Population Foundation of India (PFI), found that, while basic medicines are available most of the time at primary and secondary facilities, prescription drugs including antibiotics and 8 Volumes of required medicines are procured at a pre-determined rate and pooled at the state level, while actual invoicing and payment is done at the district level, as a result, the payment as well as supply chain systems become very fragmented. 24 Results

32 injectables are not, and had to be purchased (out of pocket) in the private sector. Lack of adequate funding, coupled with an inefficient procurement system, have been cited as two key reasons for drug shortages. Anecdotally, it has been observed by district officials that following the 14 th FC recommendations, which allows states more discretion in managing their money, there have been long delays in procurement and payment for pharmaceuticals (Pandey et al., 2015). It is not surprising then that almost 70 percent of the out of pocket expenditures on health is incurred for drugs as per the NSS 71 st round. Shortage of medicines were also reported in responses from women s groups and ASHAs in the FGDs conducted as a part of our qualitative study in villages around Patna. Respondents indicated that at times poor beneficiaries need to buy medicines ranging from Rs.500 to Rs.1000 per outpatient visit to a PHC. While the pharmaceutical policy formulation is carried by the central government, its implementation is the responsibility of state governments. As a result, states like Tamil Nadu and Karnataka with better capacities and systems have much better affordability, availability, and quality of drugs than states like Bihar which lack robust procurement and supply chain management systems. Yet the most serious obstacle to better access for medicine in India remains the paucity of government funds for public health (Bose, 2015). Key messages Despite NHM contribution, Bihar has a very low annual per capita expenditure on drugs Rs 19 per capita. The pharmaceutical procurement and supply chain management system is not effective in ensuring a steady and reliable supply of drugs. The inadequacy of government provision of drugs and pharmaceutical may be an important cause of low access and utilization of public services especially for the poor. Households may incur very high out of pocket expenditures caused by the need to purchase required drugs in the market as much as Rs per outpatient episode. Since the state resources mostly pay for human resources, the slowing of its contribution to health is likely to have a direct impact on recruitment and retention of needed human resources. Budget execution and budget utilization analysis Bihar experiences a problem of resource scarcity compounded by low budget utilization, which further reduce the resources spent on health. This section delves deeper into understanding the causes and processes of budget underutilization. The NHM fund flows routed through the SHSB include the RCH Flexi Pool; Mission Flexi Pool; NDCPs (National Disease Control Programs); routine immunization, while the component of Infrastructure Maintenance is routed through the state treasury. Budgets through the treasury route have an average utilization rate of 77 percent for the last 6 years. During the same period utilization under NHM against total approved budget is 82 percent. However, NHM funds flowing through the SHSB allow unused balances to be carried over to subsequent years as committed and uncommitted expenses. The utilization of the total available funds, including balances from last year and interests earned, is 50 percent in See Figure Results

33 Figure 15: Utilization of health budgets in Bihar: to Utilization of health budgets & funds available in Bihar: to (in percentage) Through treasury route NHM Through (Demand treasury 20) route (Demand 20) NHM (against (against approved budget) NHM (against totals funds available) Through State Health (against totals funds available) (against totals funds available) Through State Health (against totals funds available) Since the SHSB manages 45 percent of the TGHE, a low utilization rate of the NHM funds at SHSB affects the overall utilization rates. For more details See Table 12. Table 12: Budget Utilization for NHM in Bihar (In Rs. million) NHM Utilization NHM approved budget 9,786 12,547 12,739 13,452 20,371 20,169 Total funds available under NHM 17,172 17,463 20,709 22,755 33,239 30,736 Total expenditure under NHM 10,927 7,839 14,186 11,074 13,589 15,306 Overall utilization against approved budget 112% 62% 111% 82% 67% 76% Overall utilization against funds available 64% 45% 68% 49% 41% 50% Our analysis further shows that in if the SHSB spent 100 percent of the funds available, the TGHE would have increased by 49 percent from the current expenditure of Rs. 34,036 million. In light of the overall shortage of funds, the underutilization of NHM budgets in Bihar, and more specifically within the SHSB, calls for urgent action from the policy makers. Reasons for low utilization rates unpacking the box We first take a brief look at the treasury route and the 23 percent underutilized funds. We then do a deep dive within the finances of NHM/SHSB. 26 Results

34 Treasury route When analyzed by levels of care, utilization against allocations for primary care under the treasury route is about 76 percent, while utilization for secondary and tertiary care is slightly higher at 80 and 81 percent respectively. However, utilization for administration lags behind at 69 percent. When analyzed by types of inputs, operating costs and capital projects have a lower utilization rate as opposed to human resource and drugs and pharmaceuticals. It is not surprising to observe low utilization for capital projects as the time line for completing such projects tends to be longer than a year, the period at which an annual budget lapses. There are also barriers associated with obtaining the appropriate permits and delays in acquisition of land that contribute to the tardy pace of construction. See Figure 16. Figure 16: Utilization rates by Cost Inputs & Levels of Care (treasury route) 79% Utilization rates by Cost Inputs 81% 68% 100% 80% 60% 75% 75% Utilization rates by Levels of Care 71% 76% 100% 90% 80% 70% 60% 50% 40% 30% 20% 42% Human Resource Operating Cost Drugs & Pharmaceuticals Capital Projects Mean ( ) 40% 20% Mean ( ) Primary care Secondary care Tertary care Medical Education Administration Areas of significant underspending include trainings under the National Disease Control Programs; construction of sub-health centers; allocations for technical advisory services; and supervision of State Family Welfare Bureaus and District Family Welfare Bureaus. Utilizations against total Plan and Non-Plan allocations range between percent. NHM NHM was first launched in 2005 in 18 states with weak public health indicators, and eventually extended to all states. It was conceptualized to address some of the persistent systemic deficiencies in the health system, such as a fragmented approach to health care (too many vertical programs); weak or absent linkages to social and other health determinants including sanitation and clean water; inadequate financial resources, and administrative barriers to timely and effective spending. The design of NHM included a number of innovative approaches community focus; more flexible financing arrangements which included additional funding from the Center with matching funds from the State; improved planning and management through capacity building, use of untied grants, strong monitoring against standards; and finally innovations in human resource management (Nandan, 2010). Underutilization of NHM funds reflects both weak capacities at local level to plan and utilize more flexible funds as well as bottlenecks in the society route s financial management systems and capacities. Under the auspices of Panchayat Raj Institutions (PRI) a Village Health and Sanitation Committee (VHSC) is engaged in developing a sub-district plan which is then integrated into the district plan as part of bottom-up planning. District Health Plans are an important instrument of the National Health Mission. They form the basis for state health plans and budget requests from central government sources. Districts vary widely in their specific population needs and in capacity for innovation (GoI, 2007). Engagement of the PRIs should enable convergence of programs at the local level that address other determinants of health such as safe drinking water and sanitation. It should also provide local accountability in implementation of the programs. 27 Results

35 The flexible financing includes a provision for untied funds of up to Rs. 10,000 at the facility level for the facility manager to address small operational problems quickly and effectively, using her or his own discretion. These funds could be used for a range of issues from buying medical consumables, to repairs; or small performance rewards to health volunteers. This was the first time such funds were made available at the facility level. Finally, the process referred to as communitization formally encouraged partnering with NGOs for services ranging from service delivery; training; to various support services. This communitization process also encouraged several innovative actions to improve the operations at the facility level such as, renting or leasing vacant land on the premises of the facility to generate extra income; engaging with the community to maintain the upkeep of the facility; adopting sustainable practices ranging from rain-water harvesting to solar lighting and refrigeration. (Nandan, 2010) The success of these innovations in NHM depends upon having well-functioning financial management systems and capacity and leadership at all levels. Due to the limited capacity and leadership at the various levels of government in Bihar they were not able to truly benefit from NHM s flexible approach and financing and benefit from local innovation or solutions for local problems. These constraints can be observed in spending patterns for the NHM budget lines that require greater local planning and innovation. For example, the budget heads under Mission Flexi Pool like communitization, untied grants to health facilities, and village committees are the budget lines that reflect the greatest under-utilization. Some of the areas of underutilization, as shown from analysis of the NHM Financial Management Reports (FMR), include: Selection and training of ASHAs including procurement and replenishment of ASHA drug kits and ASHA incentives. Untied funds specially at the level of Village Health and Sanitation Committees. Annual maintenance grants, especially at the level of PHC and below Construction of civil works/infrastructure Corpus grants, especially at the level of CHCs IEC and BCC component Procurement of equipment and drugs Maternal death reviews Quality assurance committees Based on analysis of NHM FMRs in the last three years we see relatively high underutilization across different program components, with budgets for the NHM Flexi Pool (MFP) being the most unused. See Figure Results

36 Figure 17: NHM utilization by program component Proportion of RCH Flexipool spending 25,000 19,488 18,309 20,000 15,000 13,739 10,134 10,070 10,000 6,183 7,600 5,000 7,553 4, Proportion of NHM Flexipool spending 25,000 19,488 20,000 18,309 13,739 15,000 10,000 2,733 7,016 6,225 5,000-5,358 2,947 2, Total NHM budget RCH Flexipool Component Budget Total NHM budget NHM Flexipool Budget Budget RCH Flexipool Actual Expenditure NHM Flexipool Actual Expenditure The Mission Flexi Pool, as the name suggests, includes budget lines that encourage flexibility in spending to encourage innovation at the local level. In the absence of strong empowered leadership skills; management and planning capacity; and a transparent monitoring system allocations for communitization and grants to health facilities and village committees reflect significant under-utilization. Figure 18 presents the expenditure trends for the last three years for most of the individual budget lines of MFP 9. Figure 18: Utilization of Mission Flexi Pool budget lines under NHM 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mission Mission Flexipool Utilizations Mission Flexipool Utilizations Mission Flexipool Utilizations ASHA UF AMG HS Civil Mission Flexipool Utilizations Corpus DAP PRI AYUSH IEC/BCC MIssion Flexipool Utilizations MMU RT PPP INNO' PIMPROCUREMENT PROCURE- MENT Trends emerging from the financial data, review of audit reports and discussions with officials at different levels triangulate the same finding and highlight the under-utilization in areas of human resources; procurement; pharmaceuticals; civil construction; and expenditure related to ASHAs. See Figure UF: Untied Funds; AMG: Annual Maintenance Grants; HS: Hospital Strengthening; Civil: New Constructions / Renovation / setting up; Corpus: Corpus Grants to Rogi Kalyan Samities; DAP: District Action Plans (including block & village plans; PRI: Panchayati Raj Institutions; AYUSH: Alternative Systems of Medicine; MMU: Mobile Medical Units; RT: Referral Transport; INNO : Innovations; PIM: Planning, Implementation & Monitoring 29 Results

37 Figure 19: NHM MFP line item budget shares and utilization rates 25,000 NHM Flexipool budget and utilization of subcomponents 20,000 15,000 10,000 5,000 - ASHA Untied Fund Civil Hospital strengthening Mobile Medical Units Planning, Implementation & Monitoring Budget as a share of MFP budget Budget Utilization Specifically reasons for underutilization can be attributed to absence of systems capacity and an apparent lack of accountability within the governance structures and can be captured in the five reasons mentioned below: Sub-optimal systems for procurement and supply chain Lack of contracts design and management capacity Lack of proactive monitoring Lack of accountability within the governance structures at different levels Inability to recruit and retain the required human resources for health We present below specific areas of underutilization based on content analysis of different monitoring and audit reports of the state and the central government. Delays in civil works: Only 5 out of 298 construction works could be completed till March 2015, 35 are incomplete and 258 projects were yet to start despite the SHSB transferring Rs 4,461 million to the Bihar Medical Services and Infrastructure Corporation (BMSIC) between April 2011 and February The BMSIC was set up in 2010 as an independent corporation with the aim of streamlining procurement and supply of drugs. It was also entrusted with the responsibility of civil works, to expedite and bring about efficiency to the tardy pace of progress under the Public Works Department (as per 7 th CRM report Public Works Department could complete only 29 percent of the work assigned to it). The utilization of budget allocated for new construction/renovation was merely 39 percent in , plummeted to 7 percent in and remained at the same level in Lack of foresight and planning is evident as BMSIC was a new institution without the systems, structures, and district level reach that the Public Works Department has with its cadre of engineers and staff in each of the districts. A small infrastructure cell within the Corporation does not have adequate capacity to transform the way civil work projects were implemented in the health sector. 30 Results