Spending

Explaining the Falling Burden of Household Health Spending in India | Latest India News

The latest National Health Accounts (NHA) report – it contains data for 2018-19 – shows that the burden of healthcare spending on Indian households continues to decline. The share of direct health expenditure in total health expenditure stood at 48.2% in 2018-19, more than 10 percentage points lower than the value of 58.7% for 2016-17. This number was 64.2% for 2013-2014. What led to this sharp reduction in the share of out-of-pocket health spending? An HT analysis suggests that while higher government spending played a role, there could also be statistical factors at play. Here are five charts that explain this argument in detail.


The 2017-18 OOP expense sharing puzzle is key to understanding this

We have systematic and continuous NHA figures from 2013-14. They show that the share of direct health expenditure is decreasing every year. Notwithstanding the downward trend, 2017-18 appears to be an anomalous year in the OOP share model, given the sharp drop in this number.


Share in total health expenditure


What explains such a significant drop in the share of out-of-pocket expenses in total health expenditure in just one year? This question becomes even more relevant given that World Bank data on the share of direct expenditures also show a similar steep decline, although the World Bank’s estimates of direct expenditures are higher than in NACs.


Share of direct expenditure in total health expenditure


A new ONS health consumption survey could be the reason

It is possible that the sharp decline in the share of OOPs in 2017-18 is driven more by methodology than a reflection of the actual situation on the ground. The NHA estimates out-of-charge spending from the National Statistics Office (NSO) Health Consumption Survey, which has only been conducted twice since 2014. NHA reports through 2016-17 builds on the 2014 ONS survey, while NHA reports from 2017-18 – the year that shows a very steep decline in POO’s share – uses the survey NSO 2017-18. It is likely that the World Bank data also uses the ONS figures for its calculations.

Although a comparison of the exact estimation methodology used to extrapolate the ONS data into the NHA direct expenditure data is beyond the scope of this article, a preliminary comparison suggests that the NHA report tends to overestimate the decline in health expenditure. This is evident from the fact that the decline in out-of-pocket expenditure per capita in the NHA is greater than the decline in expenditure by disease found in the ONS report. Logically speaking, the explanation for such a drop may be the assumption that people are getting sick less often.



Evolution of the OOPE at constant prices

These debates should not call into question the importance of the increase in public health expenditure

Although the debate over the exact decline in direct spending is a moot question that can only be resolved with better and more frequent data collection, this should not undermine the contribution of increased government spending to reducing the burden of health expenditure on households. As shown in Chart 1, it was higher public spending and not private health insurance that filled the gap associated with lower out-of-pocket health spending between 2013-14 and 2018-19. This is exactly why the marginal decline in health spending as a percentage of GDP in 2018-19 should be concerning. It should also be borne in mind that the burden of healthcare expenditure could have increased significantly after the pandemic.



Union and government health spending

How does India perform in terms of OOP expenditure load internationally?

Despite the improvement in out-of-pocket spending on health care, India is among the laggards. According to World Bank estimates for 2019, out-of-pocket expenditure accounted for 54.78% of total health expenditure in India. This places India among the top 25% of countries in terms of the share of out-of-pocket expenditure in total health expenditure. Certainly, high out-of-pocket spending is a problem in lower-middle-income countries such as India, with the average for this group being 48.2%. Bangladesh fares less well, with 73% of the country’s health expenditure being out-of-pocket spending. However, the upper-middle-income countries that India wants to compete with, such as China and Brazil, are doing better. China’s out-of-pocket spending accounted for 35.2% of its total healthcare spending in 2019, while in Brazil the proportion was 24.9%.



Direct expenditure as a percentage of current health expenditure in 2019