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Healthcare expenditure through the lens of Health Satellite Accounts


By Dr Poonam Munjal, Dr Palash Baruah*
The World Health Organization (WHO) defines health as “a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity.” The role of health as an engine of economic growth is not entirely unsubstantiated. Investments in health care lead to better, healthier lives for the populace, which in turn, increases productivity, and creates an efficient workforce, thereby significantly adding to the social and economic progress of any country. It is in this context that the United Nations’ Sustainable Development Goal (SDG) has a target to “Ensure healthy lives and promote wellbeing for all at all ages” by 2030.
Healthcare and people’s well-being has been one of the greatest priorities of government at all levels – central, state and local. This has assumed critical importance since the advent of an unprecedented health crisis in the form of the COVID-19 pandemic across the world. Governments have had to spend substantially higher than the usually budgeted amounts on providing healthcare, building health infrastructure, conducting free tests for infections, undertaking free vaccination drives, and many other such exigencies. This has not only put a lot of stress on the healthcare infrastructure, it has also brought about the need to identify reliable source of finance for curative, preventive, medical scientific research & development, vaccine development, etc. While vaccinating is the top health priority for the government world over, it has to be made sure that the access to basic healthcare is not compromised.
Currently, therefore, there is a greater-than-ever need to understand the financial flows of the health expenditure through various financing schemes. The Health Satellite Account (HSA) is a framework that fulfils this requirement. It helps the government in understanding on how optimally the resources on health can be utilized by identifying the resource gaps and areas for efficient resource mobilisation.
Conceptualised by the WHO, HSA is a globally recognized framework to measure health expenditure and the flow of funds in the country’s health sector. It is a coherent, systematic, and integrated set of accounts and tables based on the SNA concepts and definitions. The HSAs present the health-related demand and supply structure. From the demand side, health accounts present the expenditure by sources and by financing schemes through which expenditures are made. From the supply side, these accounts identify the healthcare service providers and their services.
As far as the States are concerned, they are largely independent in matters relating to the delivery of healthcare to the people as health is a state subject. Each State has developed its own system of healthcare delivery, which is often independent of the Central Government. However, the States receive funds from the Central Government and also implement some of the latter’s programmes. Some examples of health care financing schemes, at the State level, include government schemes (Central, State and local), social insurance, voluntary insurance, and direct out-of-pocket payments to buy health care services.
The National Council of Applied Economic Research (NCAER) has recently prepared the first HSA for the hilly state of Himachal Pradesh, for a pre-pandemic and normal year of 2017-18. However, the framework can be used for later years including pandemic year for 2020-21 and thereafter. The health accounts are based on the methodology delineated by the National Health Accounts–Guidelines for India, 2016, prepared by the Ministry of Health and Family Welfare, Government of India, which itself is based on the internationally accepted System of Health Accounts (SHA-2011). The HSA presents the health expenditure (public and private) by four different classifications, namely, sources of finance, financing schemes, healthcare functions, and providers of healthcare facilities.
Himachal Pradesh is among the few states that despite having 90 per cent rural population has no shortfalls of PHCs, CHCs, and sub-centres that provide the most essential primary health care to the general populace. The state has 91 community health centres, 576 primary health centres, and 2084 sub-centres which reflect the capability of the State in providing primary health care in the scarcely populated state.
The HSA of the State reveals that the state spends a total of Rs. 4351.9 crore on healthcare services, which amounts to about 3.14 percent of state GDP and 5.98 percent of total government expenditure. With an estimated population of 72.33 lakh in 2017-18, the per capita health expenditure works out to be Rs. 6017.6. At the same time, the per capita Net State Domestic Product (NSDP), indicator of per capita income, for the state is Rs. 1.65 lakh.
Out of the total health expenditure, 47.9 percent is the expenditure incurred by government and private households (comprising out-of-pocket expenditure and voluntary prepayments for insurance schemes) account for the remaining 52.1 percent. The higher the proportion of public expenditure, the lesser is the dependence on household out-of-pocket expenditure. At the same time, the higher the proportion of private expenditure, the higher is the extent of financial protection available for households towards healthcare payments.
Public Health insurance expenditure refers to the finances allocated by the government towards payment of premiums for health insurance schemes or reimbursements of government employees’ health expenditure. At Rs. 102.3 crore, public health insurance expenditure is 2.4 percent of total health expenditure. On the contrary, private health insurance expenditure is much lower at 0.4 percent of total health expenditure. This indicates the lower exposure of households to opt for voluntary prepayment plans. When distributed across healthcare functions, 31 percent of total health expenditure is incurred on in-patient curative care, while 42.1 percent is incurred on out-patient curative care. Preventive care accounts for 5.8 percent.
To conclude, the HSA at national or sub-national level highlights the need to raise additional public resources, improve the efficiency of spending, and ensures the effective performance and sustainability of healthcare systems. It is a potential tool to enable the government to optimally utilise its health resources, identify resource gaps and potential areas to ensure efficient resource mobilization and hence assist in effective policy making.

*Dr Poonam Munjal is Senior Fellow and Dr Palash Baruah is Senior Research Analyst, at National Council of Applied Economic Research (NCAER), New Delhi. Views expressed in this article are personal

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