GOVERNMENT FINANCING OF HEALTH CARE IN INDIA SINCE 2005 WHAT WAS ACHIEVED, WHAT WAS NOT, AND WHY

GOVERNMENT FINANCING OF HEALTH CARE IN INDIA SINCE 2005 WHAT WAS ACHIEVED, WHAT WAS NOT, AND WHY

OUTLINE 1 Key takeaways 2 Total Government Health Expenditure (TGHE): A flow of funds view 3 TGHE in 29 states: levels, trends, and composition 4 Budget utilization in 29 states 5 PHC in 16 states: levels, trends, composition 6 PHC budget utilization in 16 states

OUTLINE CONTINUED 7 8 Are central government contributions additional to state spending? Deeper Dives: budget utilization in 5 states and what might explain differentials in budget utilization 9 Conclusions 10 Acknowledgements

KEY TAKEAWAYS Despite favorable economic conditions and an innovative program design in 2005, India has not come close to achieving its ambitious goals for increasing government spending on health. Explanations include: complex funding and federal structure, changing economic conditions, and weak public expenditure processes which new program design was not able to substantially overcome. Federal policies to reduce disparities in health spending through redistributive subsidies to poorer states were insufficient to adequately equalize spending. They were further reduced by greater shortfalls in ability to spend in those states. Government spending on health and on primary health remains very low insufficient to finance a substantial package of services. There is persistent underspending of health budgets, which is worse in the poorer states. This is caused by problems in governance, public financial management design, and operational constraints. Because poorer states are more dependent on central subsidies, greater underspending of these subsidies affects them more. More spending on health is needed, but it must be accompanied by better measures to improve the use of appropriated funds, especially where the need is greatest. The shift to block grants to states will not, in itself, remedy these problems and may make it worse.

RTM FRAMEWORK Focus of this presentation Resource Mobilization Resource Allocation Resource Utilization Resource Productivity Resource Targeting What are the determinants of total resource envelope for health at national and subnational levels? How are funds allocated to different programs and functions at national and subnational 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?

GOVT. STATES AMBITIOUS GOALS FOR HEALTH SPENDING The [National Rural Health] Mission is an articulation of the commitment of the Government to raise public spending on Health from 0.9% of GDP to 2-3% of GDP. -NRHM, GoI, 2005 Health sector expenditure by the Centre and States, will have to be substantially increased by the end of the 12 th Plan. It has already increased from 0.94% of GDP in the 10 th Plan to 1.04% in the 11 th Plan The percentage for this broader definition of health sector related resources needs to be increased to 2.5% by the end of the 12 th Plan. -12 th Year Plan, GoI, 2012

TOTAL GOVERNMENT HEALTH EXPENDITURE (TGHE) PER CAPITA Nominal, 2005-06 to 2013-14 1,400 1,200 1,000 In Rs. 800 600 400 200 -

TREND IN TGHE AS % GDP Reported by India NHA 1.50% 1.15% 1.00% 0.96% 0.50% 0.00% 2005-06 2013-14

FLOW OF FUNDS Uttar Pradesh

DATA SOURCES Data Treasury financial Source Reserve Bank of India Study of Budgets State Budget Books UP & Bihar Mid-year population Ministry of Statistics and Program Implementation, GoI yearbook 2013 NHM/SHS Expenditure NHM MIS, MoHFW, GoI (March 2015) SHS audit reports and FMRs, UP & Bihar G/N SDP Economic Survey Statistical Appendix (2014-15)

29 STATES 3 GROUPS OF STATES Empowered Action Group (EAG) + 1 states The 8 states designated as EAG states + Assam North Eastern (NE) states Non-EAG states EAG States NE States Non-EAG States

TREND IN TGHE IN 29 STATES By groups of States, 2005-06 to 2013-14 1,000,000 900,000 800,000 700,000 In Rs. (millions) 600,000 500,000 400,000 300,000 200,000 100,000 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 EAG+1 States NE States Non-EAG States 29-state (total)

AVG. NHM AS A SHARE OF TGHE IN 29 STATES By groups of States, 2005-06 to 2013-14 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 EAG+1 States NE States Non-EAG States 29-state (mean)

NHM AS A SHARE OF TGHE IN 29 STATES 2013-14 50% 45% 44% EAG States NE States Non-EAG States 29-states (mean) 40% 35% 30% 25% 20% 15% 41% 40% 37% 36% 35% 32% 30% 26% 25% 24% 23% 22% 22% 22% 22% 21% 21% 20% 19% 18% 17% 17% 17% 16% 16% 15% 13% 10% 5% 0% 6% 4%

YEAR-ON-YEAR (REAL) GROWTH RATE IN PER CAPITA TGHE By groups of States, 2006-07 to 2013-14 30% 25% 20% 15% 10% 5% 0% -5% 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 -10% EAG+1 states NE States Non-EAG States 29-state (mean)

TREND OF TGHE PER CAPITA By groups of States, 2005-06 to 2013-14, nominal and real Nominal Real 3000 3000 2500 2500 2000 2000 1500 1500 1000 1000 500 500 0 0 EAG+1 States NE States EAG+1 States NE States Non-EAG States 29-state (mean) Non-EAG States 29-state (mean)

BUDGET UTILIZATION BY SOURCE Between 2007-2015 Groups of states Mean budget utilization (Treasury) Mean budget Utilization (NHM) EAG + 1 States 85% 84% NE States 90% 78% Non-EAG States 94% 88% 29-States (mean) 90% 85%

BUDGET EFFECTIVENESS Treasury budget credibility scoring chart and results, between 2005-12 Trends in Reliability of Health Budgets (Treasury) Grade A B C D Expenditure outturn Between 95% & 105% Between 90% & 110% Between 85% & 115% Performance is less than required for a C Score 4 3 2 1 Reliability Score 3.5 3 2.5 2 1.5 1 0.5 0 2.31 2.08 EAG States 3.21 2.92 Non-EAG States 2.67 2.54 NE States 8 years avg. score (2005-12) 3 years avg. score (2009-12)

PRIMARY HEALTH CARE FINANCING 16 STATES 2008-2014

METHODS TO ESTIMATE PRIMARY CARE ALLOCATION TGHE Estimated GPHCE Estimated 1. State Health Society (NHM) 1. State Health Society (NHM) 2. State Treasury (Health) 2.1 Medical and public health (identified primary care lines based on the NHSRC Budget Tracking Toolkit) 2.2 Family welfare (all sub budget codes included) Streams of funding 1. State Health Society (NHM) 2. State Treasury (Health) Specific components included to estimate health care expenditure 1.1 Central releases 1.2 State releases 1.3 Accounts balance carried over 2.1 Medical and public health Revenue and capital (2210 and 4210) 2.2 Family welfare Revenue and capital (2211 and 4211) 2.3 Central transfers under infrastructure and maintenance (sub-set of 2.1) Other relevant variables General State Government Expenditure (GSGE) all departments Gross state domestic product Annual mid-year population Source: NHSRC Manual

16 STATES EAG AND NON-EAG 7 Empowered Action Group (EAG) states The 7 states designated as EAG states, including: Rajasthan, Madhya Pradesh, Uttar Pradesh (UP), Bihar, Odisha, Chattisgarh, Jharkhand 9 Non-EAG states Including: Punjab, Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, West Bengal, Assam EAG States Non-EAG States

Trend of GPHCE per capita Trend of GPHCE per capita 400 350 300 In Nominal Rs 250 200 150 100 50 The difference between Bihar, UP and non EAG per capita GPHCE is widening over time (7 times more) 0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Bihar 111 150 132 176 179 204 222 Uttar Pradesh 175 218 235 235 286 274 EAG 93 194 213 247 247 313 365 Non-EAG 136 179 220 260 260 355 363 All States 116 183 218 254 254 334 364

COMPARISON OF 6 YEAR AVG. GPHCE PER CAPITA Between EAG and non-eag states 500 500 450 450 400 400 350 350 300 250 241.13 300 250 265.01 200 200 150 150 100 100 50 50 0 0 State AVG EAG AVG State AVG Non-EAG AVG No significant difference between EAG (Rs 241) and non-eag (Rs 265) average per capita GPHCE

Growth in TGHE and GPHCE between 2005-06 and 2013-14 TGHE grew slightly more rapidly than GPHCE in non-eag states but GPHCE grew more rapidly in EAG states. However, since non-eag states start at higher level, we could expect to see increasing disparities in TGHE but decreasing (small) 251% disparities in GPHCE. 222% 213% 201% 264% 294% 231% 220% Bihar UP EAG+1 Non EAG Growth in TGHE Growth in GPHCE

GPHCE PER CAPITA Nominal, 2013-2014 700 EAG Non-EAG 600 578 544 514 500 480 431 In Rs. 400 300 200 378 360 347 328 312 278 276 274 272 236 222 100 0

NHM EXPENDITURE PER CAPITA 2014-2015 EAG Non-EAG 350 327 300 284 289 250 243 230 226 In Rs. 200 150 100 179 141 114 161 157 145 142 140 130 104 50 -

AVERAGE UTILIZATION OF NHM BUDGET Between 2007-2015 EAG+ 1 state Non-EAG 110% 105% 94% 93% 91% 91% 90% 87% 84% 83% 81% 81% 77% 77% 73% 51%

Central govt. funding stimulant or substitution effect? We used a model that captured the level of central allocation to primary health care in Indian Rupees in state i at time t, and measured its impact on state s own contribution to spending on primary health in state at time t, according to: stateown it =α+β1central it +β2gsdp it +β3priority it +β4rev it +f i +d t +ε it Where central it was the central level allocations to the each state for primary health care, stateownit was state s own contribution to primary health care, GSDP it represented the per capita GDP in each state at time t, priority it represented the ratio between state health spending and total state health expenditures, and rev it represented each state s own tax revenue, were state fixed effects, were nationwide time dummies, and ε it was an error term.

Central govt. funding stimulant or substitution effect? contd.! Log$of$State s$own$primary$health$spending$per$capita,$ (2005$Rs)! Log$Central$Allocations$Primary$ C0.292$(0.133)**$ Health$Spending$per$capita$ GSDP$per$capita$ 0.0001$(0.0001)$ Ratio$State$Health$Spending$on$ 2.497$(0.638)***$ PHC/Total$State$Health$Spending$ State$Revenue$per$Capita$ 0.0001$(0.0001)$ Constant$ 3.306$(0.336)***$ N$ 142$ States$ $$16$ R2$ 0.70$ * p<0.1; ** p<0.05; *** p<0.01, cluster robust standard errors in parentheses

Central govt. funding stimulant or substitution effect? contd.! Log$State s$own$primary$ Health$Spending$per$capita,$ (2005$Rs)$ EAG=1$(poor)! Log$Central$Allocations$Primary$ F0.175$(0.240)$ Health$Spending$per$capita$ Log$State s$own$primary$ Health$Spending$per$capita,$ (2005$Rs)$ EAG=0$(rich)$ F0.435$(0.086)***$ GSDP$per$capita$ 0.0001$(0.0001)$ 0.0001$(0.0001)$ Ratio$State$Health$Spending$on$ 2.224$(0.892)**$ 3.446$(1.016)**$ PHC/Total$State$Health$Spending$ State$Revenue$per$Capita$ 0.0001$(0.0001)$ 0.0001$(0.0001)*$ Constant$ 2.538$(0.540)***$ 3.417$(0.327)***$ N$ 72$ 70$ States$ $$8$ 8$ R2$ 0.62$ 0.85$ * p<0.1; ** p<0.05; *** p<0.01, cluster robust standard errors in parentheses

BUDGET UTILIZATION DEEPER DIVE IN BIHAR AND UP & WHAT S WORKING IN 3 BETTER OFF STATES?

UTILIZATION RATE FOR NHM BUDGETS AND AVAILABLE FUNDS UP Utilization against approved budget Utilization against available funds 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 81% 76% 95% 77% 77% 84% 98% 61% 67% 78% 60% 78% 47% 61% Bihar Utilization against approved budget Utilization against available funds 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 112% 62% 111% 82% 67% 76% 64% 45% 69% 49% 41% 50% Interaction of PFM systems, operational processes and governance structures Upstream Effect of timing and Downstream local community level constrained by low capacity

IMPACT OF LOW UTILIZATION OF NHM FUNDS ON THE TGHE UP and Bihar 1,60,000 1,50,370 1,40,000 1,20,000 1,19,650 In Rs. (millions) 1,00,000 80,000 60,000 40,000 20,000 34,036 50,595 0 UP 2014-15 Bihar 2013-14 Current TGHE TGHE if SHS spent 100%

APPROACH FOR THE DEEP DIVE Rajastha n Understanding reasons for better utilization of funds Treasury & NHM Scope Methods 2012-13 to 2014-15 Ernakulum & Kozhikode: Kerala Pune & Nagpur: Maharashtra Sri Ganganagr & Tonk: Rajasthan Time Sample - PEFA 2016 Framework Budget, expenditure analysis Qualitative interviews Consistently high utilization rates (under the treasury & NHM routes)

FRAMEWORK FOR THE DEEP DIVE Adapted the PEFA 2016 Framework (Public Expenditure and Financial Accountability Framework, 2016) - Aggregate expenditure outturn Indicator not used - Predictability of in-year resource allocation - Procurement - Payroll control - Internal control on non-salary expenditure - Audit coverage - Timeliness - Action taken on audit reports - Budget classification - Allocating transfers - Timeliness of transfers - Performance evaluation - Medium term exp. estimate - Medium term exp. ceiling - Alignment of plan & budget - Budget preparation process - Financial data integrity - Financial reports

KEY QUESTIONS FOR THE DEEP DIVE Budget execution Performance of Kerala, Maharashtra and Rajasthan Policy factors What policy factors enable better budget execution? Operational / process factors What operational / process factors facilitate better execution? Leadership & governance factors What leadership traits or governance factors enable better execution? Human capacity factors Specifically what type of capacities are better and at what levels that facilitate better execution?

BUDGET EXECUTION NHM utilization - Kerala, Maharashtra and Rajasthan utilize NHM budget in its entirety. Against approved NHM budget 110% 113% 106% 94% 98% 91% 82% 84% 76% 77% 75% 77% 67% 98% Bihar Kerala Maharashtra Rajasthan Uttar Pradesh 2012-13 2013-14 2014-15 - Bihar and UP suffer from a range of issues that affect budget utilization primarily at the State Health Societies

BUDGET EXECUTION NHM utilization Against total available NHM funds (including opening balance & interest earned) 143% 50% 41% 106% 97% 99% 99% 95% 98% 95% 87% 78% 61% 47% Bihar Kerala Maharashtra Rajasthan Uttar Pradesh 2012-13 2013-14 2014-15

OVERALL OBSERVATIONS Factors that facilitate high budget utilization in 3 states these factors do not explain causality, but association. No one single factor or practice explains increased utilization of funds in the health sector. Rather, range of smaller complementary actions in pro-performance environment. 1. Strong leadership at all levels 2. Strategic vision translated into policy framework Kerala Health Policy, Maharashtra, etc. 3. Little political interference. 4. Longer tenures of key officers 5. Close coordination between DOF, DOH, NHM, LSG planning, budgeting, execution and monitoring Realistic and timely planning

OVERALL OBSERVATIONS 6. Strong mentoring support at each level 7. Extensive use of technology that facilitates high levels of transparency and accountability Rajasthan: ASHA Soft, mobile app for recording on-site inspection data Maharashtra: BEAMS (budget allocation & monitoring), HR management, etc. 8. Close monitoring / quality of supervision allows for mid-course correction Maharashtra: Capital projects management & monitoring; Deputy Director at the Circle level; Guardian Minister Kerala: Standing Committees for Health in Panchayats 9. High analytical capacity data and innovation culture is supported 10. Truly devolved governance structures financial and decision making authority Kerala: District Program Managers are from Government health system have all powers & authority Rajasthan: Block CMO since 2008 with administrative and financial authority

CONCLUSIONS Ø Ø Ø Ø Ø Ø India has not achieved its ambitions to increase government spending on health. Despite significant increases, government funding remains insufficient to finance a basic package of health care in many states Substantial disparities in government spending persist across states despite a significant central government effort at redistribution A significant share of budgeted funds remain underutilized, with worse utilization for the more innovative funding channels which disproportionately affect the poorest states Governance, public financial management design, and operation problems all combine to undermine better program performance More money for health is needed, but this must be accompanied by new approaches to improve expenditure effectiveness It is unlikely that devolution of spending authority to the states alone will remedy these problems especially in the poorer states.

Ø Ø SOME THOUGHTS ON WHAT TO DO States need to decide to give priority to health and balance demands for population health improvement and financial risk protection. Central grants can help, but this is basically a political problem that needs advocacy and policy support. Improving public expenditure performance in worse performing states needs strategies that address three elements: PFM Design Governance Operational capacities Ø Ø Ø Separating funding from provision and introduction of a purchasing model is one strategy to remedy weaknesses in government delivery. E.g. district-level purchasing fund. State governments have used varied approaches to this in insurance. Unclear if this can address constraints in weaker states needs careful design and testing