Introduction

India’s health sector is at a critical juncture, grappling with the persistent challenge of low public health spending. Despite setting a target of raising public health expenditure to 2.5% of GDP, the current spending stands at approximately 1.35%. This inadequate investment leads to high out-of-pocket expenditures for households, exacerbating financial stress, especially in the wake of events like demonetisation, the implementation of GST, and the COVID-19 pandemic.

The Financial Burden on Households

• The financial strain on households is stark, with 13.4% of rural and 8.5% of urban households resorting to borrowing to cover medical expenses.
• Many families, unable to afford proper healthcare, either seek free public care, forgo treatment, or opt for substandard care within their budget.
• Alarmingly, an estimated 60-80 million households have fallen below the poverty line due to medical expenses, highlighting a significant paradox in Indian politics where health remains a non-issue in elections despite its critical impact on citizens’ lives.

The Dual Burden of Disease

• India’s health system faces the dual burden of communicable and non-communicable diseases. While communicable diseases can be episodic and manageable, non-communicable diseases require lifelong management, necessitating a robust, steady, and agile health system.
• Achieving this balance requires a mix of skilled personnel, advanced technology, adequate infrastructure, and effective supervisory systems, all of which demand substantial financial investment.

Current Public Health Spending

• Since 2010, India’s public health spending has stagnated around 1.12% to 1.35% of GDP.
• Despite an increase in central budget allocations from ₹25,133 crore in 2012-13 to ₹86,175 crore in 2023-24, the proportion relative to GDP remains low.
• States, on average, spend only 5% of their revenue budgets on health, significantly below the targeted 8%, with poorer states like Bihar experiencing even lower allocations.

Positive Developments and Necessary Reforms

• Recent loans from the World Bank ($65 million) and the Asian Development Bank ($175 million) aim to strengthen district-level disease surveillance, establish ICUs in large districts, and enhance primary healthcare facilities.
• While these loans address critical gaps revealed during the COVID-19 pandemic, India must continue investing in basic health infrastructure, particularly in states like Bihar, Uttar Pradesh, Madhya Pradesh, Odisha, Rajasthan, Chhattisgarh, Jharkhand, and Assam, where resource shortfalls are significantly above the national average.

Demand-Side Interventions and Fiscal Policies

• Current demand-side interventions, like Ayushman Bharat (PMJAY), have limited value without insured outpatient care.
• The Finance Ministry should not only increase health budgets but also allocate the entire health cess collected to the health sector.
• Rationalising GST levies on health products, such as reducing the 18% GST on health insurance premiums and the 5% GST on insulin and hepatitis diagnostics, is crucial.
• Additionally, disincentives should be considered for private entities that raise healthcare costs despite receiving substantial tax exemptions and other incentives.

A Call for a Comprehensive Health Reform

• The core issue in India’s health sector revolves around the role of the state and the social contract with its citizens.
• Health should be recognised as a public good and a foundational prerequisite for human development.
• A significant increase in the health budget, coupled with comprehensive reforms, is essential to rectify the dysfunctional system.
• This process requires time, political consensus, and stability, drawing lessons from other countries that have successfully reformed their health systems.

Conclusion

For India to realise its aspiration of becoming a developed country by 2047, it must prioritise health as a critical component of its development model. Doubling the health budget and implementing systemic reforms are imperative steps towards achieving this goal, ensuring equitable access to quality healthcare for all citizens.