Budget 2021-22 Explainer: Healthcare After The Pandemic

This explainer on public health financing in India ahead of budget 2021-22 delineates the key areas of central and state funding, and explains why this year's budget is especially significant.

Budget 2021 - Health spending

New Delhi: The upcoming budget for 2021-22 will reveal revised estimates for last year's Union Budget, which will indicate how much was actually spent on healthcare to tackle the pandemic during the 2020-21 fiscal year.

Experts also expect enhanced allocations to healthcare, not only to manage COVID-19 cases but also to vaccinate people against the disease. (Read our series, The Price of COVID, here.)

In this explainer, we outline how public healthcare is financed in India, the spending trends over the last few years, and what to look out for in the next year's budget.

How much more was allocated in 2020 for COVID-19?

The Union Ministry of Health and Family Welfare comprises two departments--Department of Health and Family Welfare and Department of Health Research. Every year, the budget is calculated as the sum total of money allotted to both. The last Union Budget allocated Rs 67,112 crore ($9.2 billion) to the Union health ministry.

Besides this, Rs 14,232 crore ($1.95 billion) was additionally allotted to the health ministry, according to the Union government's supplementary budget published in September 2020 (The supplementary budget lists out expenses that were incurred or budget allocations that needed to have been made over and above what had been announced in the beginning of the year in the Union Budget).

Further, at least Rs 10,297.02 crore ($1.4 billion) was earmarked specifically for COVID-19 expenses, split among the ministries of health, science and technology (Rs 350 crore ($47.97 million)) and rail (Rs 630 crore ($86.36 million)) ministries. The Union health ministry, alone, received at least an additional Rs 9,327 crore ($1.23 billion) to meet COVID-19 expenses.

How is the sector funded?

India's expenditure on healthcare is covered both privately (by individuals) and publicly (by the state). India's annual Union Budget makes an allocation for healthcare to the Ministry of Health and Family Welfare. A large chunk of this money is sent further on, to states and Union Territories for them to spend on healthcare.

Apart from the Centre's allocation, state governments, for their part, also set aside money for healthcare in their own budgets. They get the money for this from the revenues generated by their state.

Government data indicate that states and Union Territories taken together, allocate over three times what the Centre allocates on healthcare. For example, states and union territories spent Rs 1.17 lakh crore ($16 billion) on healthcare in 2015-16 (actuals). This increased to Rs 1.48 lakh crore ($20.3 billion) in 2016-17 (revised estimates) and to Rs 1.58 lakh crore ($21.7 billion) in 2017-18 (budget estimates). This is according to data from the Union health ministry on financing of the health sector.

The Centre also makes contributions to international organisations such as World Health Organization, Global Alliance for Vaccines and Immunization and the Global Fund to Fight AIDS, Tuberculosis and Malaria. A total of Rs 85.6 crore ($11.7 million) had been set aside for India's contributions to global health bodies in the Union Budget 2020-21.

Do multiple ministries fund the sector?

While the bulk of India's public sector funding for healthcare comes via the Union health ministry or the health departments in states, an intersectional analysis of the budget shows that projects and departments in other ministries also fund aspects of healthcare.

Several other ministries and departments work on issues which affect healthcare, either directly or indirectly, such as nutrition or clean drinking water and access to toilets: For example, Ministry of AYUSH, which funds and promotes development of traditional medicine, Department of Pharmaceuticals, Department of Drinking Water and Sanitation, which funds the National Rural Drinking Water Mission and the Swachh Bharat Mission for creation of toilets, and the Integrated Child Development Services in the Ministry of Women and Child, which looks after matters of nutrition and other protections for children.

The allocations to these departments in the Union Budget 2020-21 totalled Rs 52,531 crore ($7.19 billion). This is besides the Rs 67,112 crore ($9.2 billion) allocated to the Union health ministry alone, and does not include state budget allocations.

Budget and spending trends over the years

The defence ministry typically gets the Union Budget's biggest budget allocation every year. This was the same case in the last budget, in which the Ministry of Defence was allocated Rs 4.7 lakh crore ($64.6 billion). India's health ministry received the ninth highest budget allocation, with Rs 67,112 crore ($9.2 billion). In this case, India's defence allocation was seven times that of healthcare.

What are the focus policy areas that receive major funding?

Within the Union health ministry's budget, one of the largest components has typically been the allocations to the National Health Mission (NHM) and to schemes for maternal and child health, such as immunisation, family planning and nutrition.

In the Union Budget 2020-21, NHM was allocated Rs 33,400 crore ($4.6 billion). This is about half of the total Union health ministry's budget of Rs 67,112 crore ($9.2 billion).

However, the NHM budget allocation has fallen from the revised budget 2019-20 by 1.15%, our analysis of the budget documents showed. The allocations to the urban and rural health missions did not change much between 2019-20 and 2020-21.

What has grown in importance in the health budget is the allocation made to the Ayushman Bharat scheme, also known as Pradhan Mantri Jan Arogya Yojana (PM-JAY).

It was announced in 2017 and has promised to cover 100 million families with health insurance cover worth Rs 5 lakh per family. As of December 2020, 51,500 health and wellness centres were functioning across India and 14.5 million people had availed cashless treatment under this scheme, according to the government.

PM-JAY was allotted Rs 6,400 crore ($880 million) in the two previous Union Budgets. The actual spending on the scheme in 2018-19, was Rs 1,997.9 crore ($270 million), while revised estimates for 2019-20 indicate a spending of Rs 3,200 crore ($440 million). In other words, the scheme's budgetary grant has tripled in three years.

What areas need more funding?

For years, public health professionals in India have spoken about the need to increase funding for public health and this sentiment was reinforced by the COVID-19 pandemic. COVID-19 has brought new challenges and expenses in healthcare to the fore. One such challenge is the COVID-19 vaccination drive, which aims to cover at least 250 million people this year, as announced by the Union health minister in October 2020.

"It was the public sector that had to provide the bulk of COVID-19 care," T. Sundararaman, former dean of the School of Health System Studies at the Tata Institute of Social Sciences, told IndiaSpend in December last.

Although, over the last few years there has been a lot of attention on the Ayushman Bharat scheme--both health insurance and the creation of health and wellness centres--none of this was enough, during the pandemic, Sundararaman explained. Poor patients were forced to turn to the "private sector or [pushed] into a no-care zone", he said. Also, continuing to rely on the private sector would be detrimental and other non-COVID or essential health services would suffer without government intervention into public health, he added.

"On the one hand, routine health expenditures for TB and immunisation slowed down in 2020, while on the other, there was a big spike in expenses for hospitals and ventilators to tackle COVID-19. So, some of this will reflect in the budget to be announced on February 1," said Avani Kapur, director of the Accountability Initiative.

In 2021 though, a combination of a likely slowdown of cases and introduction of vaccines are likely to cut down the spending on hospitals. Hence, the government's focus and funding would shift to vaccinations, said Kapur.

"If the COVID vaccination programme is going to depend on the already existing systems for reproductive child health, then we can expect funding into this area of health... but for COVID-19," she added.

The Centre's expenditure on healthcare is 1.2% of its gross domestic product (GDP), according to the most recent data from the National Health Accounts (2016-17). This number has stayed between 1.2% and 1.6% of GDP, between 2014 and 2020, according to the Economic Survey.

As noted above, India typically spends most of its budget on defence. In last year's budget, the defence ministry received seven times as much money as the health ministry. However, India's National Health Policy in 2017 had envisioned that India would spend at least 2.5% of its GDP on healthcare by 2025.

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