Editorial 1 : A system that heals
Introduction: The National Health Policy (NHP) 2017 envisions universal access to quality and affordable healthcare. The nation’s commitment to increasing public expenditure on health in recent years is evident from the National Health Accounts (NHA) data, including the provisional estimates for 2020-21 and 2021-22.
A consistent rise in health expenditure
1. Rise in government health expenditure (GHE) as a proportion of GDP
- The National Health Accounts (NHA) data show that government health expenditure (GHE) as a proportion of GDP increased by an unprecedented 63 per cent between 2014-15 and 2021-22.
- It rose from 1.13 per cent of GDP in 2014-15 to 1.35 per cent in 2019-20.
- This further increased to 1.60 per cent in 2020-21 and to 1.84 per cent in 2021-22.
- In per capita terms, GHE increased from Rs 1,108 to Rs 2,014 between 2014-15 and 2019-20.
- This trend has continued with per capita government expenditure reaching Rs 2,322 in 2020-21 and Rs 3,156 in 2021-22 — almost three times the level of 2014-15 as per the provisional estimates.
- Economic surveys have also reported an increasing trend in health-related expenditure by the government. As a share of GDP, it was 1.6 per cent in FY 2020-21 and 2.2 per cent in FY 2021-22 (revised estimate).
2. Rise in expenditure on government-financed insurance
- The expenditure on government-financed insurance has increased 4.4 fold from Rs 4,757 crore in 2013-14 to Rs 20,771 crore in 2021-22.
- This reflects rising investments in the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PMJAY) and state health assurance/insurance schemes.
- The share of social security expenditure on health (which includes government-funded health insurance, medical reimbursement to government employees, and social health insurance programmes) has increased from 5.7 per cent in 2014-15 to 9.3 per cent in 2019-20 of the total health expenditure.
A consistent decline in Out-of-pocket expenditure
- There has been a consistent decline in Out-of-Pocket Expenditure (OOPE) as a share of the total health expenditure — it dropped from 62.6 per cent to 47.1 per cent between 2014-15 and 2019-20.
- This trend has continued with the share of this expenditure dipping to 44.4 per cent in 2020-21 and to 39.4 per cent in 2021-22 as per provisional NHA estimates.
- The resilience of the health system was evident when the OOPE continued to decline in the face of the raging virus during the Covid-19 pandemic (2020-21 and 2021-22).
Factors contributing in the declining OOPE
- The declining OOPE is a product of several enablers.
1. Availability of Government support in ancillary medical services
- AB-PMJAY beneficiaries today do not have to borrow or sell assets to access surgical and medical treatment for serious conditions, including cancer.
- The utilisation of government facilities, especially for inpatient care and institutional deliveries, has gone up as per the National Sample Survey (2017-18).
- Free ambulance services, strengthened government secondary and tertiary services and the Pradhan Mantri National Dialysis Programme (under which over 2.59 crore free dialysis sessions have been held since 2016) are important contributors to averting OOPE.
2. Reduced costs of Drugs and Diagnostics
- Drugs and diagnostics are a major driver of out-of-pocket spending.
- Free drugs and diagnostics services in facilities, including those at over 1,69,000 Ayushman Arogya Mandirs (AAMs, Health and Wellness Centres) have led to major financial savings for families.
- The subcentre AAMs provide 105 medicines and 14 diagnostic tests free.
- The primary health centre AAMs are mandated to provide as many as 172 medicines and 63 diagnostic tests free.
- Early screening and free treatment of non-communicable diseases, as mandated at AAMs, will prolong healthy life and avert catastrophic expenditure on treatment of their future serious life-threatening complications.
- Today, through more than 10,000 Jan Aushadhi Kendras, over 1,900 quality generic medicines and nearly 300 surgical items are being sold at a low cost in practically all the districts.
- Estimates show that since 2014, a saving of Rs 28,000 crore has accrued to the consumers by this scheme.
- Likewise, price regulation of coronary stents, orthopaedic knee implants, cancer drugs and other essential medicines has resulted in a saving of Rs 27,000 cr per annum to the people.
A consistent increase in other social services
- Apart from expenditure on health services and goods, the estimates of economic surveys also incorporate spending on important social determinants of health, especially water supply and sanitation.
1. Safe drinking water and Sanitation
- Safe drinking water and sanitation have remarkable positive health effects.
- At the time of the launch of the Jal Jeevan Mission in 2019, only 17 per cent of rural households had access to tap water.
- As of now, about 76 per cent have a functional household tap connection.
- As per a WHO report, once tap water is made available in every rural household, it would save four lakh lives over five years.
- Likewise, the WHO has estimated that the Swachh Bharat Mission (SBM) Grameen, which has resulted in rural India being open defecation free (ODF), would have averted more than 3,00,000 deaths (due to diarrhoea and protein-energy malnutrition) between 2014 and October 2019.
2. Establishing robust health care infrastructure
- Funds for infrastructural support under various schemes such as Pradhan Mantri Swasthya Suraksha Yojana (aimed at creating medical colleges and new AIIMSs), Pradhan Mantri Ayushman Bharat Infrastructure Mission and Emergency Response and Health System Preparedness Package (aimed at developing pediatric and adult ICUs) are strengthening the country’s health infrastructure.
- Further, the health grants to local bodies under the 15th Finance Commission award (amounting to Rs 70,000 crore) are being injected into the primary health system.
Conclusion: India’s health system is on the reform-perform-transform path to make Universal Health Coverage a reality in the near future. In this endeavour, recent trends of increasing government financing for health and declining stress of OOPE are in the right direction.
Editorial 2 : Last mile hitch
Introduction: As was expected, on Wednesday, the US Federal Reserve voted to keep interest rates steady as inflation remains elevated, and uncertainty persists over the trajectory of inflation.
The reasons for not changing fed rates
- The federal funds rate remains at 5.25-5.5 per cent.
- “Inflation is still too high”, acknowledged Fed chair Jerome Powell.
- Data released by the US Labour Department had previously shown that inflation, as measured by the consumer price index, rose to 3.5 per cent in March, up from 3.2 per cent the month before, exceeding expectations.
- This indicates that the last mile of disinflation is proving to be difficult.
- As the Fed also notes, “in recent months, there has been a lack of further progress towards the committee’s 2 per cent inflation objective.”
Why rate cuts did not happen as expected from federal reserves?
- In the beginning of this year, there were expectations of multiple rate cuts by the Fed this year.
- In fact, the Fed dot plot had pointed towards the possibility of three rate cuts.
- However, with uncertainty over inflation, not only has the timing of the rate cuts been pushed back, but there has also been a scaling down of the magnitude of the rate cuts.
- Cuts are only likely to materialise when there is “greater confidence” on the trajectory of inflation.
- The strong growth momentum in the US economy — as per the Fed, “economic activity has continued to expand at a solid pace”, “job gains have remained strong”, and the “unemployment rate has remained low” — provides room to the Fed to keep rates higher for longer.
Trends of interest rates from other Western central banks
- While actions of the US Fed do tend to reverberate across the world, not all central banks are likely to delay cutting interest rates.
- In fact, the dynamics across major economies may be diverging.
- Christine Lagarde, President of the European Central Bank, has strongly asserted that the bank is “data dependent, not Fed dependent”.
- There are indications of the Euro zone central bank likely to begin cutting rates in June.
- There are also expectations of the Bank of England cutting rates before the Fed.
- Inflation in the UK moderated to 3.2 per cent in March, down from 3.4 per cent in February.
Reserve Bank of India keeps its policy rate unchanged
- In its last meeting, the monetary policy committee of the Reserve Bank of India had voted to keep interest rates unchanged.
- The MPC also faces a conundrum.
- Food inflation is elevated, while core inflation remains subdued.
- And with the RBI projecting inflation at 4.5 per cent in 2024-25, real interest rates are at 2 per cent which might be considered excessive.
- While there are expectations of monsoon being above normal this year, clarity will emerge in the coming months.
- Greater certainty over the monsoons, and the trajectory of food prices could provide space to the MPC to pivot.
Conclusion: US Fed holds rates, because inflation is still a hurdle. Interest rate cuts are likely to materialise when there is ‘greater confidence’ on the trajectory of inflation.