Ravi Duggal rduggal57@gmail

1. FINANCING CHALLENGES IN THE CONTEXT OF NRHMPresentation for Consultation of Civil Society Response to the NRHM Initiative Ravi Duggal rduggal57@gmail.com

2. HEALTHCARE FINANCING • The largest source of financing healthcare in India is out-of-pocket or self-financing. Out-of-pocket spending on healthcare as a mode of financing is both regressive and iniquitous. Latest estimates based on National Accounts Statistics indicate that private expenditures on healthcare in India are about Rs.1650 billion and 99% of this is out-of-pocket. Public expenditures on healthcare are about Rs.310 billion additionally. Together this adds up to 6.5% of GDP with out-of-pocket expenses accounting for 83% of the share in total health expenditures or 5.5% of GDP.

3. HEALTHCARE FINANCING.. • This is a substantial burden, especially for the poorer households, the bottom three quintiles, which are either below poverty line or at the threshold of subsistence, and when illness strikes, such households just collapse. In fact, for the poorer quintiles the ratio of their income financing health expenditures is 2 to 4 times more than the average. Further, while this burden is largely self-financed by households a very large proportion of this does not come from current incomes. A very large proportion, especially for hospitalisations comes from debt and sale of assets.

4. SOURCES OF FINANCING [1] Estimates derived by author based on - NSS-1996 (1998): Report No. 441, 52nd Round, NSSO, New Delhi, GOI [2] Compiled from - Ministry of Finance (2004): Finance and Revenue Accounts, New Delhi, GOI; Reserve Bank of India (2005): Finances of State Governments, Mumbai, RBI; Labour Bureau (2002): Labour Year Book, Simla, GOI; MoHFW (2002). Health Information India, Ministry of Health and Family Welfare, New Delhi, GOI [3] Estimates derived by author based on - CSO (2004). National Accounts Statistics, CSO, New Delhi, GOI [4] Private health insurance data estimates obtained through personal communication with Insurance Companies

5. Healthcare Financing – Rs. billion

6. INEQUITIES IN SHARE OF PUBLIC HEALTH RESOURCES

7. Inequity in Health Spending

8. FINANCIAL CHALLENGES • Using Existing Resources Efficiently and Equitably: • If current public health resources are distributed on a per capita basis across regions then the rural-urban inequities in resource allocation will be eliminated. Thus the Rs. 300 billion currently spent by health ministries would be distributed at Rs. 300 per capita in both rural and urban areas, instead of the present Rs. 85 per capita in rural and Rs. 550 per capita in urban areas. • 75% of medical graduates are from public medical schools and they receive almost free education; only 15% join public medical service. Compulsory public service for 3-5 years as a social return can fill the gap in medical personnel for rural healthcare facilities • Effective use of public subsidies in the private sector for poor • Improvement of allocative efficiency in the use of available resources

9. FINANCING CHALLENGES.. • Raising New Resources: • Health cess of 2% on turnover of health degrading products like cigarrettes, beedis, paan masalas, guthka as well as on vehicles, road tax, land revenues, property taxes etc earmarked for public health can raise one third additional resources for the public health budget • Strengthening and increasing the base of social insurance programs which can easily cover 60% of the work force on a contributory basis; convert ESIS into National Universal Insurance • New / additional taxes for health similar to profession tax, use of Tobin tax etc.

10. NRHM CONTEXT • Restructuring healthcare delivery mechanisms • Organising, regulation and accreditation • Autonomy in decision making • PRI and civil society oversight and audit • Restructuring financing mechanisms • Financial flows and autonomy in use of funds • Enhancing resource allocations • Social insurance and additional taxes

11. NRHM – ILLUSTRATIVE STRUCTURE Health Manager BLOCK LEVEL HEALTH OFFICE –--------------- Accountant Store Keeper Accredit private providers for public health goals 100,000 Population 100 Villages BLOCK LEVEL HOSPITAL Ambulance Telephone Obstetric/Surgical Medical Emergencies 24 X 7 Round the Clock Services; Strengthen Ambulance/ transport Services Increase availability of Nurses Provide Telephones Encourage fixed day clinics 30-40 Villages CLUSTER OF GPs – PHC LEVEL 3 Staff Nurses; 1 LHV for 4-5 SHCs; Ambulance/hired vehicle; Fixed Day MCH/Immunization Clinics; Telephone; MO i/c; Ayush Doctor; Emergencies that can be handled by Nurses – 24 X 7; Round the Clock Services; Drugs; TB / Malaria etc. tests 5-6 Villages GRAM PANCHAYAT – SUB HEALTH CENTRE LEVEL Skill up-gradation of educated RMPs / 2 ANMs, 1 male MPW FOR 5-6 Villages; Telephone Link; MCH/Immunization Days; Drugs; MCH Clinic 1000 Popu lation VILLAGE LEVEL – ASHA, AWW, VH & SC 1 ASHA, AWWs in every village; Village Health Day Drug Kit, Referral chains

12. Investment Requirements Rs. in crores

13. NOW 20% public expenditure (0.9% GDP), often inefficient and ineffective. 80% private expenditure, mostly out of pocket 15-20% GoI expenditure – rest by States By 2012 40% public expenditure with improved accountability and efficiency ( 2-3% GDP) Private expenditure by risk pooling/insurance – less duress and distress 40% GoI expenditure – rest by States Health Financing

14. FINANCIAL ISSUES - NRHM • Source of enhanced revenues not clear • Capacity of states to raise additional resources • Fund flows still shrouded with lot of distrust • Poor capacity at unit/program level in financial management • Designing of payment mechanisms • Dovetailing with restructuring and regulation of health systems

15. ALTERNATE MODEL • Universal access as the starting point • No targeting of populations but adequate provisions to address vulnerabilities • Comprehensive approach – integration of the entire health system • Public private provision possibilities • Within 2% of GDP

16. Primary healthcare with following features: • Staff composition for each PHC-Dispensary to include 2 doctors, 1 PHN, 2 nurse midwives, 8 ANMs (females), 4 MPWs (males), 1 pharmacist, 1 clerk/stat asst., 1 office assistant, 1 lab technician, 1 driver, 1 sweeper – this adds up to salaries and benefits of Rs. 3,064,000 (salary structures across states may be different and hence this could vary; options for alternate payment mechanisms) • 10 beds per PHC • Average rural unit to cover 20,000 population (range 10-30 thousand depending on density); average urban unit to cover 50,000 population (range 30-70 thousand population depending on density) • Non-salary costs separately for rural and urban units per unit cost as per table below:

18. 2. Secondary Care • In rural areas for every 5 PHCs there would be one 50 bedded hospital and this would cost Rs. 200,000 per bed per annum or Rs. 10 million per such hospital. As per this ratio we would need 7000 rural hospitals and this would translate into Rs. 70 billion for the country as a whole. • In urban areas for each 10 PHCs one 200 bedded hospital would be needed and this would cost Rs. 250,000 per bed per year or Rs. 50 million per hospital. As per this ratio 600 such hospitals would be needed and this would translate into Rs. 30 billion for the country as a whole. 3. Tertiary care / Teaching Hospitals • One such hospital per 2.5 million population, that is 400 hospitals of 500 bed each at a cost of Rs. 350,000 per bed per year translating into Rs. 175 million per hospital or Rs. 70 billion for the country as a whole. • Primary + Secondary + Tertiary = Rs. 359.50 billion • 4. Other costs • Capital @ 10% or Rs. 35.95 billion • Research and Data systems @ 4% or Rs. 14.38 billion • Admin costs @ 4% or Rs 14.38 billion • Audit costs @ 2% or Rs 7.19 billion • Grand Total would be Rs. 431.40 billion or Rs. 431 per capita and this works out to 1.7% of GDP. This calculation excludes medical education and medical research, which would be 15% and 10% of the total healthcare cost, respectively, amounting to an additional Rs.108 billion.

19. Summary Table

20. THANKS