India today is on the cusp of 75 years of Independence amidst a global pandemic, a black swan event that has brought to the forefront an urgent need for stronger health systems and re-emphasised that our biggest resource is our people. Appropriate health policy-pivoting is evident in Budget 2021-22 that aims to break free from the shackles of Covid-19-induced vulnerabilities.
The Budget has committed to an outlay of ₹2,23,846 crore in health and well-being for 2021-22, a 137 per cent increase over this year’s Budget Estimate of ₹94,452 crores. This is also in line with the Economic Survey’s recommendation of increasing public health spending from 1 per cent to 2.5-3 per cent of GDP.
With a holistic approach to health, incorporating ‘preventive’, ‘curative’, and ‘well-being’ aspects, the Budget envisages a heightened role for the government in the years to come for delivering sustainable health outcomes. Bringing this vision to life entails active improvement on health governance, a central lever to increase the efficiency of each rupee spent on healthcare. This necessitates looking into the effectiveness of governments in delivering quality healthcare to their citizens.
Public expenditure
Literature abounds in evidence of public health expenditure being a key determinant of sustainable health outcomes. However, beyond a critical minimum level of expenditure, public health spending alone may not be sufficient to achieve this goal. For instance, the UN Global SDG and World Development Indicators show that Singapore’s levels of Under Five Mortality (UF-MOR) and Maternal Mortality (MMR) are five to eight times better than Vietnam’s despite both governments spending close to 2.5 per cent of their GDP on health (2015-2017).
Similarly, while Israel and Namibia’s public health spending ranges from 4-4.5 per cent of GDP, Israel’s MMR and UF-MOR are three per one lakh live births and 3.7 per 1,000 live births respectively compared to 195 and 42.4 in Namibia.
Interestingly, if we compare the quality of governance of these countries as captured by Government Effectiveness Index — one of the perception based Worldwide Governance Indicators surveyed by World Bank (2019) — Singapore (100 percentile rank) and Israel (87.5) perform very well on quality of governance compared to Vietnam (53.8) and Namibia (56.3).
On the other hand, emerging economies like India and South Africa spend about 1 per cent and 4 per cent of their respective GDP on health and yet witness comparable health outcomes in terms of UF-MOR (34) and MMR (132) on average. Strikingly, again, their governance rankings are similar at 63.9 percentile rank for India and 66.3 for South Africa. These statistics point towards the role of factors beyond public expenditure in driving health outcomes.
In an attempt to unmask this nuanced relationship between health expenditure and health outcomes, we undertook a panel regression of 176 countries during 2000-2019 to estimate if higher government effectiveness enhances public health expenditure elasticity of U5-MOR and MMR.
To further control for country-level variables that may confound this association, we included variables such as economic development (proxied by per capita GDP), health worker density and proportion of births attended by skilled personnel. Our results clearly reveal that while public health expenditure has a statistically significant impact in improving U5-MOR and MMR outcomes, higher government effectiveness significantly enhances this overall impact.
A country’s movement from medium government effectiveness (percentile rank >30 and <=70) to high government effectiveness (percentile rank>70) increases its health expenditure elasticity of MMR and U5-MOR by almost 2 and 1.2 times respectively.
Given the efforts taken by the government recently to boost health spending, these results make a compelling case for prioritisation of health governance across three levels —the macro-level (health system within which the health facility operates); the meso-level (institutional decision-making); and the micro-level (last mile health service delivery). This is critical to bring to fruition the Budget’s endeavour of building a Swasth Bharat.
The writers are with Macro-economic Unit, Department of Economic Affairs, Ministry of Finance