The Union Budget is an important document which reflects the fiscal commitments of the government towards various sections of the population. Therefore, it merits public attention and deserves to be widely discussed.
The Budget is one of the many policy instruments available to the government. It is supposed to be a statement of accounts. Over the years, it has come to be perceived as the most momentous policy document pregnant with the possibilities of ushering in structural change. In mainstream economic policy parlance, the budget is the occasion for ‘big-bang reforms’. Successive finance ministers have also pandered to this expectation by making grand-sounding statements.
On a prosaic note, it is important to remember that the allocations made in the Budget in any financial year are not definitive – the figures will be revised upwards or downwards and one can get the complete picture only after two financial years when the actual figures come.
More importantly, the Budget in any given year has to be analysed in the light of the Economic Survey presented a day or two before the Budget is tabled in the Parliament. We will be missing the wood for the trees if we attempt to look at the two in isolation.
Interestingly enough, the Economic Survey 2017-18 is not so gung-ho about the state of the economy. Contrary to the confident posturing of the budget, the Survey paints a pretty sobering picture of the economy. So the budgetary allocations and pronouncements must be analysed against the assessment made in the Economic Survey.
This short essay aims to examine the soundness of the much-trumpeted National Health Protection Scheme which promises an insurance coverage of ₹5 lakh to hundred million poor and vulnerable families, by “extending healthcare to at least 50 crore people in the country.”
Chapter 10 in Volume II of the Economic Survey 2017-18, titled “Social Infrastructure, Employment and Human Development” makes for a very depressing reading. At the very outset, even as it acknowledges the imperativeness of providing a robust social infrastructure for achieving economic progress, it states the following:
“Being a developing economy, there is not enough fiscal space to increase the expenditure on critical social infrastructure like education and health in India. However, given the limited resources, the Government has consistently prioritized strengthening the educational and health profile of the population.”
One cannot help but be astonished that the survey could muster the courage to make such an admission in an openly unabashed manner. The self-imposed artificial fiscal straitjacket, in the form of the Fiscal Responsibility and Budget Management (FRBM) Act, gives primacy to the so-called ‘fiscal discipline’ over the well-being of the people. This doesn’t inspire confidence in the lofty pronouncements made in the budget.
The unwarranted obsession with the fiscal deficit number (3% of the GDP) has no theoretical or empirical basis, especially in an economy operating at less than the full employment level of output. Also, it is pertinent to ask what prevents the government from increasing the fiscal space available, especially when it claims that the economy is witnessing a widening of the tax base as a result of the bold structural reforms it has undertaken.
The limited fiscal space argument stems from the view that the resources in an economy at any given point in time is fixed, thereby implying that such scarce resources need to be allocated efficiently. The view that allocating more resources to the social sector doesn’t constitute efficiency in allocation flies in the face of the supply-side growth theory – the strategy to which the government subscribes.
Critically evaluating the growth strategy of the Narendra Modi led NDA II government as outlined in the Economic Survey 2014-15, Alex M Thomas makes the following remark:
“Given that human capital development is a prominent determinant of economic growth in both orthodox and heterodox growth theories, it is indeed surprising to see it get so little economic attention in the current Indian economic ‘reforms’.”
Moreover, when it is very clear to the government that “investment in human capital is a prerequisite for a healthy and productive population”, offering an excuse that there isn’t enough elbowroom to devote more resources is an abdication of responsibility which falls squarely in the domain of the state. One cannot appreciate the view that economic growth will take care of people’s education and health without any external intervention. Historical evidence points to the growth experiences of countries driven primarily by mass, publicly-funded education and state sponsored universal healthcare benefits. The Economic Survey is not unaware of this fact.
The intellectual inconsistency in policy-thinking and analysis is very stark. Recognising that education, health, housing and sanitation are not just critical inputs in the human capital formation but also fundamental human rights (that every individual must enjoy and exercise) is key to our vision of a just, decent and humane society. By ceasing to treat human beings as capital and integrating human development with human rights, we can express our intent to move away from just being a market society. Also, the claim that the ‘government has consistently prioritized strengthening the educational and health profile of the population’ doesn’t stand scrutiny when tested against the paltry and (mostly) stagnant allocations (as a percentage of GDP) and India’s unenviable human development indicators.
Table 1: Trends in Social Services Expenditure by General Government (Centre and States)
Now that we have seen the gap between rhetoric and reality, and the contradiction in the government’s own thinking with regard to the social sector, shedding light on the state of the nation’s health can help us question and challenge the rationale of an insurance-based National Health Protection Scheme.
We shall begin by looking at the Survey’s analysis of healthcare expenditure in India:
“[…] expenditure by the Government healthcare providers accounted for about 23 percent of the Current Health Expenditure (CHE) as per National Health Accounts 2014-15 that reflects the prominence of private hospitals and clinics among health care providers. The expenditure on pharmacies accounted for 29 percent of CHE by both health care providers (government and private). In a developing country like India, incurring higher levels of Out of Pocket Expenditure (OoPE) on health adversely impacts the poorer sections and widens inequalities.”
This categorical and accurate description of the failure of the state to provide universal healthcare and the excessive reliance on private players in a country with an abysmal health profile sums up the performance of the state in providing basic public services in a broad-based manner. In such a context, the new health protection scheme (in the form of insurance) has been promised.
There’s no doubt that an insurance has a very important role in enabling access to healthcare and medical services when poor and vulnerable households experience health shocks. But, how do we make sure that horrendous episodes of state apathy, as manifested in the tragic death of scores of children in the BRD Medical College Hospital in Gorakhpur last year, are effectively prevented from happening in the first place? Can insurance solve the deep-rooted malaise in our healthcare system and actively pre-empt such unfortunate circumstances? Acknowledging that the problems are systemic and that cosmetic solutions cannot make any significant dent is the first step towards addressing the problems.
Right from primary healthcare centres (PHC) down to the tertiary medical service provision, there are serious gaps in terms of administrative and technical capacity. A stock-taking exercise undertaken by IndiaSpend makes the following observations:
1. In 2016, sub-centres were 20% short of human resources, while primary and community health centres were 22% and 30% short, respectively, according to the 2016 Rural Health Statistics (RHS).
2. Most functioning rural health facilities in India lack basic infrastructure – 29% of sub-centres did not have regular water supply, 26% lacked electricity supply and 11% did not have all-weather roads connecting them, according to the 2016 RHS data.
3. Primary healthcare centres (PHCs) are supposed to be the first point of contact between the village and a medical officer. Each PHC is manned by a medical officer and 14 paramedical staff, and is supposed to be equipped with an operation theatre, six beds, essential laboratory facilities and a pharmacy.
4. While 63% of PHCs did not have an operation theatre and 29% lacked a labour room, community health centres were short of 81.5% specialists – surgeon, gynecologists and pediatricians.
To hope that the insurance-based ‘largest’ health protection scheme will tackle these structural nuts-and-bolts issues can be nothing but a pie-in-the-sky illusion. This should not distract us from the problems inherent in relying on insurance to fix our chronic health problems.
Researchers in the field of health economics have systematically recorded the pitfalls of health insurance. There is a view, even among mainstream economists, that healthcare – both preventive and curative – is an area that cannot be left to the market forces and private players. The agreement is more pronounced particularly in the case of health insurance.
Insurance readily exhibits the most well-known forms of market failure – information asymmetry, moral hazard, adverse selection, and externalities. Market failures occur when the forces of demand and supply operating through the price mechanism fail to allocate resources efficiently. Each of the aforementioned forms of market failure end up affecting those who need healthcare the most by way of under-provisioning, given the ‘public good’ characteristic of healthcare and the logic underlying the functioning of markets.
In most discussions about healthcare, what gets short-changed is the ‘preventive’ component, which is essentially what public health should be all about. Even though healthcare and disease-care, in the form of medical treatment in hospitals, are very important, they come much later.
Clarifying that public health and healthcare are two distinct aspects, T. Jacob John, professor emeritus at Christian Medical College, Vellore, argues in a Mint column that:
“Healthcare is labour-intensive, given by one worker to one client at a time. Clinics and hospitals are visible infrastructure and sought after as a felt need in times of distress. Public health, on the other hand, is invisible infrastructure, working in society to mitigate social determinants of diseases and in the environment to mitigate environmental determinants of diseases. […] Monitoring of all disease burdens can be done only by public health. Without monitoring by public health, most of our disease-control projects are flying blind. Democracies are for the welfare of all people. Disease prevention is about equitable use of resources since the benefits are enjoyed by everyone.”
What emerges from this analysis is the urgency with which the state’s capacity to deliver public goods and essential public services has to be ramped up. Of late, there has been an acknowledgement of the crucial role the state has to play in some areas to lay the foundation for a thriving market economy, even by those with a pro-market tilt. Their arguments in favour of enhancing state capacity are compelling, although some of their policy prescriptions may be problematic.
Nonetheless, having identified improved state capacity as a prerequisite for stable and sustainable growth, their policy advice should entail warning the government about the potential dangers of making insurance the bedrock of healthcare in India – and impress upon it the indispensability of a well thought-out public health infrastructure.
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Featured image used for representative purposes only.