Fiscal Instruments for Health in India

Abstract

It has been recognized for some time that the primary determinants of population health and health inequalities, particularly in low- and middle-income countries (LMICs), lie outside of the health care system (CSDH 2008). These determinants include individual-level factors—such as access to clean water and sanitation, nutrition, and antenatal care—as well as environmental-level factors—such as pollution, walkability of neighborhoods, rates of open defecation, and tariffs on food imports and exports.Exposure to these hazardous risk factors is the primary contributor to adverse health outcomes, which increase resource demands on health care systems and increase private and public health expenditures. The impetus for universal health coverage (UHC) in countries as diverse as Brazil, India, and South Africa has run up against the barrier of these broader determinants that hinder efforts to improve health. There are three additional challenges to UHC: The economic slowdown has significantly reduced growth rates and government revenues in LMICs. Annual growth rates in Brazil, the Russian Federation, India, China, and South Africa (BRICS) were a population weighted average of nearly two percentage points lower during 2011–15 than during the previous decade (World Bank and IHME 2016). As a result, government expenditures and the ability to increase spending on health care have tightened. The narrow fiscal space for health care, even in countries with relatively high growth rates, is a consequence of a low tax base and constrains health care spending by national and state governments. In India, although government health expenditures as a proportion of total government expenditures are comparable to similar countries, they lag when measured as a proportion of gross domestic product (GDP). Countries seeking to transition to UHC have weak health care systems that are challenged in delivering quality health care coverage even when additional resources are available. India and South Africa are examples of countries where the health care system serves a fairly small proportion of the population; large segments are excluded from even basic health coverage. Despite the recognition that social determinants exercise a significant influence on population health in LMICs as direct interventions in the health sector, there remains a limited understanding of how existing fiscal policy instruments available to governments in LMICs can be leveraged to improve health.This chapter presents the analytic framework for assessing the potential of fiscal instruments to improve population health. We describe the application of this method to specific interventions in India and discuss the implications of these policy changes. The goal is to inform policies at ministries of finance that have an effect on health, either through new policies or by examining existing policies that affect important health risk factors.