Mumbai: Four states--Arunachal Pradesh, Sikkim, Meghalaya and Nagaland--lost their chance to earn performance-based funds for 2019-20 from India’s largest public health programme, the National Health Mission (NHM), because they failed to meet immunisation targets in 2018-19. These performance-based funds make-up 20% of the NHM funds given to states.

In 2017-18, 90% of the central government’s share of the NHM budget was assured to states. The remaining 10% was dependent on each state’s performance towards the targets given and tracked by the Ministry of Health and Family Welfare (MOHFW). Now, 80% is assured and 20% depends on a state’s performance.

Such performance-based funding for health, which is conditional on states’ achievement of pre-decided health targets, aims to push states to improve results. However, the government needs to invest more in resources--especially the health workforce--states need more flexibility in budgeting and target-setting as well as better and transparent monitoring to enable states to compete for incentives, experts have told IndiaSpend.

This would also prevent weaker states from being unfairly penalised.

“Currently, states are varied in capacity, yet all states are being made to run the same race,” said Amir Ullah Khan, a health economist and professor at the Marri Channa Reddy Institute for Human Resource Development of the Telangana government. 

States are lagging behind now not because of a lack of incentives but because they do not have the capacity to improve. First the government must invest heavily in resources, especially human resources, to try to bring states to a similar level, he said.

Why northeastern states lost money

In 2018-19, to qualify for the performance-linked funds for 2019-20, the less developed Empowered Action Group (EAG) states of Jharkhand, Uttarakhand, Rajasthan, Madhya Pradesh, Bihar, Chhattisgarh and Odisha, and hilly and northeastern Indian states should have fully immunised at least 75% of children under the age of one year, while the rest of the states should have fully immunised 80% of children.

Arunachal Pradesh, Sikkim, Meghalaya and Nagaland failed to achieve this goal and were disqualified from receiving any performance-based funds.

Union territories had a qualification criterion of 80% full immunisation, but this was waived as MOHFW could not calculate these numbers accurately.

How public health is funded

As India’s largest public health programme, the NHM is a major instrument through which the central government provides financing and support to the states for strengthening their public health systems. In 2018-19, 55% of funds from the country’s health budget were given to the NHM.

To receive NHM funding, each state must prepare and submit a Programme Implementation Plan, which includes key strategies to address public health challenges in the state and budgetary requirements for the year. The MOHFW then approves the budget and allocates funds based on these plans.

In many cases, states only receive approval for a certain percentage of the funds requested. Two of the disqualified states--Nagaland and Arunachal Pradesh--had the lowest proportion of funds approved for their state budgets in 2018-19, at 55% and 61% respectively, according to Accountability Initiative, a Delhi-based public policy research institute. 

Both central and state governments contribute funds to the state NHM budget, but the central government provides the larger portion, according to Accountability Initiative.

Realistic goal-setting

States earn or lose funds based on their performance on seven indicators determined by the MOHFW. These indicators form the ‘conditionality framework’.

Conditionality Framework, 2018-19
Indicators Weightage
Improving incremental performance based on NITI Aayog Report 40
Operationalising Health and Wellness Centres 20
Implementing Human Resource Information System 15
Grading of District Hospitals 10
Mental Health Services In Districts As Per The Rights-Based Mental Health Framework 5
Screening of 30+ population for Non-Communicable Diseases 5
Rating of Primary Health Centres on the 12 functionalities 5

Source: Health System Strengthening, Conditionality Report of States, 2018-19

Experts said that this method of deciding targets is unfair to states as the process is completely top-down and does not give states the right to choose indicators.

For instance, choosing immunisation as a qualifying indicator is based on the central government goal of fully immunising 90% of Indian children under the age of one year by December 2018 through Mission Indradhanush and Intensified Mission Indradhanush.

It was only in 2018-19 that this indicator became the all-important qualifying criteria. In 2015-16 and 2016-17, immunisation was a performance indicator with a weightage of five. In 2017-18, it was removed as a standalone indicator, appearing instead as part of another performance indicator, the NITI Aayog Health Index. 

Such indicators might become a deterrent for weaker states that are too far below the qualification threshold to even qualify for the performance-based funds.

To qualify for performance-based funds in 2020-21, EAG, northeastern and hilly states will have to achieve 85% full immunisation coverage while all other states will have to achieve 90%. This would, for instance, require Nagaland to increase its immunisation coverage from 47% to 85% within one year; else, the state will lose all performance-linked funds.

Even if Nagaland were to improve its immunisation coverage by 20 percentage points to 67% in the span of a year, it would be disqualified from receiving any incentives. On the other hand, if Mizoram, with a current immunisation coverage of 87%, were to not make any progress on this outcome, it would still qualify for the incentives.

States are awarded incentives or penalties based on their performance on the conditionality framework. Arunachal Pradesh would have received an incentive of 2 (rounded up from 1.8) out of a possible 20, if the state had qualified for the funds, equivalent to approximately 10% of the performance-based funds. However, as it could not meet the qualifying immunisation requirement, it received the maximum penalty (-20) and lost all funds.

States should be allowed to set outcome goals for themselves, based on their priorities and health plan, and spend as per their own needs, said Avani Kapur, fellow at the think-tank Centre for Policy Research and director of Accountability Initiative, suggesting an overhaul of these indicators.

Flexible budgeting

“We haven’t adequately restructured our social policy financing in a manner to enable the idea of performance incentives,” said Kapur. States don’t have the flexibility to design their budgets as per their needs, Kapur explained.

“In NHM, our planning and budgeting continues to be centralised with line-item wise budgeting which hampers autonomy,” said Kapur. Line-item budgeting is a method with limited flexibility wherein expenditure must follow strictly defined budget categories. “As a result, states cannot always spend as per needs. In such a scenario the better governed states will gain more from the performance grant,” Kapur explained.

If a state loses money in one year, it could push them to improve next year or, they might be unable to improve given the lack of finances, said Kapur. There is also a possibility that they might game the system, she added.

More transparent monitoring

Health experts and independent observers cannot critically evaluate performance-linked funding as limited data are available publicly. The MOHFW has released detailed data on the improvement by states only for the financial year 2018-19. 

Each state’s Performance Implementation Plan only mentions the total incentive amount that a state can earn, without saying how much funding the state actually received after the performance assessment.

MOHFW provided performance-based funds to states under the NHM in 2015-16 and 2016-17 as well, but there is no information on the final incentives given to states for those years. “We have started publishing the conditionality report for performance-based funding from 2018-19,” Vikas Sheel, joint secretary in-charge of NHM said. Performance-based funding was also given to states in 2017-18, but those data are not publicly available, he added.

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

Mumbai: Four states--Arunachal Pradesh, Sikkim, Meghalaya and Nagaland--lost their chance to earn performance-based funds for 2019-20 from India’s largest public health programme, the National Health Mission (NHM), because they failed to meet immunisation targets in 2018-19. These performance-based funds make-up 20% of the NHM funds given to states.

In 2017-18, 90% of the central government’s share of the NHM budget was assured to states. The remaining 10% was dependent on each state’s performance towards the targets given and tracked by the Ministry of Health and Family Welfare (MOHFW). Now, 80% is assured and 20% depends on a state’s performance.

Such performance-based funding for health, which is conditional on states’ achievement of pre-decided health targets, aims to push states to improve results. However, the government needs to invest more in resources--especially the health workforce--states need more flexibility in budgeting and target-setting as well as better and transparent monitoring to enable states to compete for incentives, experts have told IndiaSpend.

This would also prevent weaker states from being unfairly penalised.

“Currently, states are varied in capacity, yet all states are being made to run the same race,” said Amir Ullah Khan, a health economist and professor at the Marri Channa Reddy Institute for Human Resource Development of the Telangana government. 

States are lagging behind now not because of a lack of incentives but because they do not have the capacity to improve. First the government must invest heavily in resources, especially human resources, to try to bring states to a similar level, he said.

Why northeastern states lost money

In 2018-19, to qualify for the performance-linked funds for 2019-20, the less developed Empowered Action Group (EAG) states of Jharkhand, Uttarakhand, Rajasthan, Madhya Pradesh, Bihar, Chhattisgarh and Odisha, and hilly and northeastern Indian states should have fully immunised at least 75% of children under the age of one year, while the rest of the states should have fully immunised 80% of children.

Arunachal Pradesh, Sikkim, Meghalaya and Nagaland failed to achieve this goal and were disqualified from receiving any performance-based funds.

Union territories had a qualification criterion of 80% full immunisation, but this was waived as MOHFW could not calculate these numbers accurately.

How public health is funded

As India’s largest public health programme, the NHM is a major instrument through which the central government provides financing and support to the states for strengthening their public health systems. In 2018-19, 55% of funds from the country’s health budget were given to the NHM.

To receive NHM funding, each state must prepare and submit a Programme Implementation Plan, which includes key strategies to address public health challenges in the state and budgetary requirements for the year. The MOHFW then approves the budget and allocates funds based on these plans.

In many cases, states only receive approval for a certain percentage of the funds requested. Two of the disqualified states--Nagaland and Arunachal Pradesh--had the lowest proportion of funds approved for their state budgets in 2018-19, at 55% and 61% respectively, according to Accountability Initiative, a Delhi-based public policy research institute. 

Both central and state governments contribute funds to the state NHM budget, but the central government provides the larger portion, according to Accountability Initiative.

Realistic goal-setting

States earn or lose funds based on their performance on seven indicators determined by the MOHFW. These indicators form the ‘conditionality framework’.

Conditionality Framework, 2018-19
Indicators Weightage
Improving incremental performance based on NITI Aayog Report 40
Operationalising Health and Wellness Centres 20
Implementing Human Resource Information System 15
Grading of District Hospitals 10
Mental Health Services In Districts As Per The Rights-Based Mental Health Framework 5
Screening of 30+ population for Non-Communicable Diseases 5
Rating of Primary Health Centres on the 12 functionalities 5

Source: Health System Strengthening, Conditionality Report of States, 2018-19

Experts said that this method of deciding targets is unfair to states as the process is completely top-down and does not give states the right to choose indicators.

For instance, choosing immunisation as a qualifying indicator is based on the central government goal of fully immunising 90% of Indian children under the age of one year by December 2018 through Mission Indradhanush and Intensified Mission Indradhanush.

It was only in 2018-19 that this indicator became the all-important qualifying criteria. In 2015-16 and 2016-17, immunisation was a performance indicator with a weightage of five. In 2017-18, it was removed as a standalone indicator, appearing instead as part of another performance indicator, the NITI Aayog Health Index. 

Such indicators might become a deterrent for weaker states that are too far below the qualification threshold to even qualify for the performance-based funds.

To qualify for performance-based funds in 2020-21, EAG, northeastern and hilly states will have to achieve 85% full immunisation coverage while all other states will have to achieve 90%. This would, for instance, require Nagaland to increase its immunisation coverage from 47% to 85% within one year; else, the state will lose all performance-linked funds.

Even if Nagaland were to improve its immunisation coverage by 20 percentage points to 67% in the span of a year, it would be disqualified from receiving any incentives. On the other hand, if Mizoram, with a current immunisation coverage of 87%, were to not make any progress on this outcome, it would still qualify for the incentives.

States are awarded incentives or penalties based on their performance on the conditionality framework. Arunachal Pradesh would have received an incentive of 2 (rounded up from 1.8) out of a possible 20, if the state had qualified for the funds, equivalent to approximately 10% of the performance-based funds. However, as it could not meet the qualifying immunisation requirement, it received the maximum penalty (-20) and lost all funds.

States should be allowed to set outcome goals for themselves, based on their priorities and health plan, and spend as per their own needs, said Avani Kapur, fellow at the think-tank Centre for Policy Research and director of Accountability Initiative, suggesting an overhaul of these indicators.

Flexible budgeting

“We haven’t adequately restructured our social policy financing in a manner to enable the idea of performance incentives,” said Kapur. States don’t have the flexibility to design their budgets as per their needs, Kapur explained.

“In NHM, our planning and budgeting continues to be centralised with line-item wise budgeting which hampers autonomy,” said Kapur. Line-item budgeting is a method with limited flexibility wherein expenditure must follow strictly defined budget categories. “As a result, states cannot always spend as per needs. In such a scenario the better governed states will gain more from the performance grant,” Kapur explained.

If a state loses money in one year, it could push them to improve next year or, they might be unable to improve given the lack of finances, said Kapur. There is also a possibility that they might game the system, she added.

More transparent monitoring

Health experts and independent observers cannot critically evaluate performance-linked funding as limited data are available publicly. The MOHFW has released detailed data on the improvement by states only for the financial year 2018-19. 

Each state’s Performance Implementation Plan only mentions the total incentive amount that a state can earn, without saying how much funding the state actually received after the performance assessment.

MOHFW provided performance-based funds to states under the NHM in 2015-16 and 2016-17 as well, but there is no information on the final incentives given to states for those years. “We have started publishing the conditionality report for performance-based funding from 2018-19,” Vikas Sheel, joint secretary in-charge of NHM said. Performance-based funding was also given to states in 2017-18, but those data are not publicly available, he added.

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.



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