The period of liberalisation, privatisation, and globalisation, or LPG, has consistently impacted government expenditure on social services, with education and health being the worst affected. Despite these facilities largely being at the heart of government policy making, public education and health institutions never excelled during the pre-LPG era. With the advent of privatisation under LPG policies, people were left at the mercy of market forces for access to better education and health services.
While data on out-of-pocket health expenditure in the pre-LPG era is not readily available even up to 2000, it is believed that people, especially poor, spent very little of their own money on health services. Health, particularly the treatment of diseases, has always been a top priority for families and individuals. When government health services are lacking, people are forced to spend out-of-pocket to access these services.
After LPG, out-of-pocket expenditure on health facilities increased not only in absolute terms but also as a percentage of total health expenditure. Notably, in 1991, government expenditure on health— which also included various related services such as medical and public health, family welfare, water supply and sanitation, nutrition, child health, and welfare of people with disabilities—was 2.36 per cent of GDP. By 2013-14, this figure had declined to 1.15 percent, while people’s out-of-pocket expenditure on health had risen to 2.6 per cent of GDP. It has also been recorded that out-of-pocket expenditure on health reached 64.2 per cent of total health expenditure in 2013-14, which shows a massive shift in the burden of healthcare costs from the government to individuals.
More out-of-pocket, less govt expenditure
There were many factors that led to the increase in out-of-pocket expenditure on health. These included the decline in public expenditure on health as a percentage of GDP, the consequent deterioration of public health facilities, the proliferation of private hospitals and nursing homes, and the growing awareness and concern about health among the general public, including the underprivileged.
The disproportionate reduction in government spending on health has also been a matter of great concern for India. Due to the prevailing poverty, people do not have enough money for treatment and are forced to either borrow or sell their belongings to access private health facilities. After the Narendra Modi-led BJP came to power, the Ministry of Health and Family Welfare said in a statement in January 2015 that 6.3 crore people are pushed into poverty every year due to “catastrophic” spending on health care, which neutralises the benefits of various government schemes aimed at reducing poverty and increasing incomes.
This problem is not limited to India; the rest of the world is equally affected by it. A recent WHO study published in the British Medical Journal (BMJ) said, “A growing number of people in Europe and Central Asia are spending so much on healthcare that they do not have enough money for their other essential needs – what is called ‘catastrophic health expenditure’, which occurs when a family’s out-of-pocket payment exceeds a certain level of paying capacity. And it is becoming more and more common.”
But a matter of satisfaction in India is that according to recently released data, over the years, private out-of-pocket expenditure as a percentage of total expenditure on health has come down from 64.2 per cent in the year 2013-14 to 39.1 per cent in 2021-22. At the same time, government expenditure has increased from 28.6 per cent in 2013-14 to 48 per cent in 2021-22. If we look at it from the other side, it is found that government expenditure as a percentage of total expenditure on health has increased from a mere 1.15 per cent in 2013-14 to 1.9 per cent in 2023-24.
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How was this made possible?
Out-of-pocket expenditure on health has come down drastically due to several reasons. The most important among them is the introduction of a public health insurance programme called Ayushman Bharat Pradhan Mantri Jan Arogya Yojana. Under this scheme, Ayushman cards are issued to the eligible population. Currently, there are about 35 crore beneficiaries of this scheme. Ayushman Bharat card holders are provided assured treatment of up to Rs 5 lakh. However, only treatment of indoor patients (IPD) is covered under this scheme, and not OPD patients. Apart from this, the government has also started many programmes for primary health care, which are also helping in reduction of out-of-pocket expenditure on health.
The PM-JAY scheme has recently been expanded to include citizens above 70 years of age from all income groups, so that they can be provided comprehensive health facilities. This extension will further reduce private out-of-pocket health expenditure and increase the proportion of public expenditure on health. It is worth noting that the government has set a target of taking public expenditure on health to 2.5 per cent by 2025.
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At par with other countries
It has to be understood that there was a time when out-of-pocket expenditure had reached almost 70 per cent of the total expenditure on health (in 2012-13); and the government’s expenditure on health was only 1.15 per cent of the GDP. But now, with the expenditure from private pockets dropping to 39.1 percent and government expenditure on health at 1.9 per cent of the GDP, India is now reaching the level of those select countries that fall in the category of middle income group and upper-middle income group.
It is worth noting that according to the World Bank data, in 2021 the out-of-pocket expenditure on health in upper-middle income countries was an average of 31.37 per cent of the total expenditure on health, and about 34 percent in middle income countries. Given the pace at which private expenditure is coming down in India, one can hope that the country will soon be able to stand up to the level of at least middle income countries.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi. He tweets @ashwani_mahajan. Views are personal.
(Edited by Aamaan Alam Khan)