Competing for better health?

Poor quality of healthcare, regardless of whether this is provided in the private or public system, is the elephant in the room


For a sector that is widely acknowledged to be seriously underfunded, states with the poorest health indicators also have the greatest difficulty in spending their meagre resources. Photo: Mint
For a sector that is widely acknowledged to be seriously underfunded, states with the poorest health indicators also have the greatest difficulty in spending their meagre resources. Photo: Mint

The Modi government’s record on healthcare has been remarkably unimpressive. Three years into its term, the government is yet to articulate a road map for health. The draft national health policy remains just that—a draft. The new National Health Protection Scheme announced in last year’s budget, amidst expectations that the government was headed toward a greater focus on tertiary care, is yet to be implemented. Health budgets have seen little change.

Last year, the health ministry’s budget received a marginal 13% increase in nominal terms. The flagship National Rural Health Mission or NRHM (now renamed National Health Mission or NHM) saw no change in allocations. And while states are now expected to play a greater role in health financing—a reasonable expectation in light of the Fourteenth Finance Commission recommendations—the centre has been remarkably silent on the question of its own role in this new financing architecture.

This lack of attention to health comes at a serious cost. Two-thirds of total health expenditure is out-of-pocket. But the elephant in the room is the poor quality of healthcare, regardless of whether this is provided in the private or public system. There is now a large and growing body of evidence that points to corruption, poor regulation, absenteeism, low effort, lack of use of treatment protocols, over-medication and worse, harmful treatment that plague the country’s health system. Accountability mechanisms have all but broken down. As economist Jishnu Das’s work in rural Madhya Pradesh highlights, underperforming government doctors are more likely to put in greater effort and offer a correct diagnosis in their private clinics than in public health centres. For the last decade, the policy response to the health crisis has been to strengthen primary health systems through the centrally financed NHM. Launched by the UPA (United Progressive Alliance) government in 2005, NHM today accounts for 50% of the health ministry’s total budget. A decade on, the programme has had limited success in addressing the accountability failures and is in urgent need of reform.

A core objective of the NRHM was to increase health spending in 18 “high focus” states with the poorest health indicators. But the fiscal transfer design has privileged the relatively better-off states. For instance, in 2014-15, Kerala received Rs299 per capita from the centre while Bihar received Rs124. One reason for this is that fund transfers are tied to expenditure performance. A combination of design, procedural and human resource constraints have resulted in low spending in poorer states creating a vicious cycle of low releases and even lower spending. In 2015-16, Uttar Pradesh spent only 58% of its approved NRHM budget. Bihar spent 53% compared with Karnataka’s 88% and Kerala’s 98%. The irony is inescapable. For a sector that is widely acknowledged to be seriously underfunded, states with the poorest health indicators also have the greatest difficulty in spending their meagre resources.

By design, NRHM prescribed a uniform approach for health systems strengthening—increasing health inputs and incentivizing use of health facilities through a cash transfer programme Janani Suraksha Yojana (JSY). States had some flexibility to devise pathways to meet these goals. Recognizing the need for accountability and changing provider incentives, the programme sought to involve local governments. In practice, however, flexibility was abandoned and New Delhi took over line item management. While studying health financing in Uttar Pradesh, we learnt that districts don’t begin spending till orders are received. With Delhi making decisions, states lost the incentive to plan and local governments were marginalized. Consequently, the approach to primary health delivery is remarkably similar across states even though infrastructure, household behaviour and outcomes vary widely.

Centralization has led to some success in expanding access to public healthcare. However, it has failed in the task of addressing health provider incentives and establishing norms of accountability in health systems. This is best illustrated in the experience of JSY. Between 2004 and 2014, institutional deliveries in rural India have increased from 35% to 80%. A total of 56% of institutional births took place in public hospitals in 2014. However, quality care remains elusive. Demographer Diane Coffey’s recent research on the experience of JSY beneficiaries in rural Uttar Pradesh is a sobering reminder of this fact. Her work highlights the gross negligence of hospital staff towards patients. This, combined with demand for rents, unnecessary procedures and maltreatment (patients reported being yelled at and slapped), impose significant psychological, and emotional costs to women.

Despite a slow start, the government has a unique opportunity to induce accountability in NHM and other health interventions. The NITI Aayog has recently initiated the process to develop an index that measures state performance on health outcomes. This could serve as the bedrock of a performance-based fiscal transfer system. Rather than linking financing to line item budgets, funding could be made conditional on a state reform plan financed through a single block grant from the centre. This grant could then be topped up by a performance grant linked to NITI Aayog’s outcomes index. Several countries including Pakistan (in its Punjab province), Argentina and Brazil have adopted this approach. There are two advantages to this approach. First, in the absence of a line item budget, the centre will be freed up to provide technical support to states. This will be critical if the Fourteenth Finance Commission recommendations are to be implemented in spirit. Linking plans to one block grant will create incentives for strengthening planning capacity and adopting state-specific strategies. Second, as studies on Argentina’s performance financing system highlight, if designed well, performance incentives could catalyse a culture of accountability in health systems as states compete for funding and thus serve as a starting point for rescripting accountability systems at the front line. India cannot afford another year of paralysis in health policy. The Modi government has an opportunity to change the business-as-usual model. It’s time for action.

Yamini Aiyar is a senior fellow at the Centre for Policy Research (CPR) and director of the Accountability Initiative. Avani Kapur is a fellow at CPR and leads Accountability Initiative’s research in Public Finance.

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