1

Budgeting in Health Care System and Health Care Financing

Presenter: Dr. Vaishnavi CGuide: Dr. Chethana TDept of Community MedicineMSRMC, Bangalore

6/20/2016

2

Contents

Introduction

Budgeting in Health care

Definition,

Need

Types

Approaches

Procedure

Challenges

Union budget 2016-17

12th five year plan

Health Care Financing

Definition

Principles

Sources

Models

Criteria

Trends of financing

Financing in India

NHA

Conclusion & References6/20/2016

3

Introduction

Government – to provide affordable, equitable,

accessible and quality health care

Progress towards a healthier nation - close correlation of

health sector with economy

Health care expenditure requires a significant

contribution from the government

Countries that need the largest health advances are

precisely those spending the least on health

6/20/2016

4

IntroductionPublic health expenditure - component for the

provisioning of health facilities

*Definition–

“recurrent and capital spending from government

budgets, external borrowings and grants and social

health insurance funds”

*Source: World Bank- Health Systems Financing

6/20/2016

5

Financial Control in Health Settings

Proper accounting system for funds, equipment

Laid down standards of performance against which actual

performance would be measured

Tools of control:

Budget

Hospital cost control

Financial statement analysis

6/20/2016

6

Source: Health Systems Financing- Toolkit on monitoring health systems strengthening, WHO

6/20/2016

8

Budgeting in health care system

‘Budget’ - French word “Bougette”

- leather ‘pouch’ or leather bag

Public sector invention

Anticipated receipts & available resources of an

organisation during the given year

6/20/2016

9

‘Budget System’ was introduced

in India on 7th April, 1860. James

Wilson the first Indian Finance

Member delivered the budget

speech expounding the Indian

financial policy as an integral

whole for the first time

History of budget in India

6/20/2016

10

Post independence, the first

budget was presented on

November 26, 1947 by India's

first Finance Minister Sri

R.K. Shanmugham Chetty.

History of budget in India

6/20/2016

11

Budget:

Definition:

“A statement of future plans described in quantitative

and monetary terms, for a specific period of time, which

is usually one year in case of financial budgets”

Source: Union Budget 2016-17. Ministry of Finance, GOI. http://www.unionbudget.nic.in/

6/20/2016

12

Need for Budget

Need for proper budgeting arises to allocate scarce

resources to various governmental activities

Planned expenditure and accurate foresight of

earnings are sine-qua-non 

Has to be based on the long term strategy & focus on

future

All health care professionals should have a sound

knowledge of budgeting and health care financing

6/20/2016

14

Types of Budgets

Time-based Budgets

• Long term• Short term• Current• Rolling (Progressive)

Function-based budgets

• Capital based (Planned)• Operational (Non-Plan)• Research budgets

Flexibility-based budgets

•Fixed budgets•Flexible budgets

6/20/2016

15

Approaches to budgeting in health care

3 approaches to budgeting:

1. Incremental approach

2. Performance budgeting

3. Zero Based Budgeting (ZBB)

6/20/2016

16

1. Incremental approach

› Previous year’s expenditure is applied to the next year

with additional components

› Only the increment over the previous year’s budget is

actually justified for the present duration

6/20/2016

17

Advantages:

Easy to prepare, less preparation time and lower

preparation costs

Easy to understand & prevents conflict

Disadvantages:

wasteful expenditures and priorities are not ascertained

Alternative better options are not considered

6/20/2016

18

2. Performance budgeting

Presents the actual operations undertaken department-

wise & evaluation of actual performance of the

organisation

Periodic performance reports is prepared which

compares the budgeted actual performance with the aim

to detect any deviations at the earliest possible.

6/20/2016

19

3. Zero Based Budgeting (ZBB)

Must review the existing & old programs, especially

which involve a high degree of discretionary costs

Justification that the activity proposed is essential, cost

effective is required

No activity or action is financed simply because it was

done in the past and the entire program must be justified

each time a budget is being drawn up.

6/20/2016

20

Advantages of ZBB:

Based on cost benefit analysis

Strictly based on priority of programs/ actions

Identifies areas of wasteful expenditure

Limitations:

Planning requires greatest effort and time

Less applicable for those activities which do not have a

direct cost-benefit relationship

6/20/2016

21

Advantages of budgeting

Effective means of communicating future organizational plans to all people, in monetary and financial terms

Pre-decided and approved budget serves as an effective benchmark for monitoring ongoing operations

Reduces wastage and losses by identifying wasteful expenditures well in advance and rectifying them.

6/20/2016

22

Advantages of budgeting

Budgets through participation, encourage & develop team spirit and collective responsibility towards excellence.

Basis for assessing performance of senior managers in any organisation

6/20/2016

23

Procedure of Budgeting in India

Ministry of Finance – Shri Arun Jaitley

Department of Economic Affairs (Secretary - Shri Shaktikanta Das)

Budget Division (Joint secretary)

The finance secretary, revenue secretary, secretary of Economic Affairs & Planning Commission - determine the contour of the budget.

6/20/2016

24

Execution of the budget

Enactment of the budget

Execution of the budget

Parliamentary control over finance

•Compilation and co-ordination of the estimates •Scrutinized by the Planning Commission

Presenting the budget to Lok Sabha and Rajya Sabha

Ministries are authorized to draw the necessary amounts And spend them

Ensuring that the money has been spent for the purpose stated by it

Procedure of Budgeting

6/20/2016

25

Key challenges to health care budgeting in India

Public expenditure on healthcare to be increased from 1.3

(2014) per cent to 5 per cent of the GDP to match the

global average expenditure

A robust plan for effective utilisation of existing budgets

so that public expenditure is fully utilised

6/20/2016

26

Key challenges to health care budgeting in India

High burden of out - of-pocket expenditure (OOP) in

India

Hospital bed density - 0.9 per 1,000 persons*

0.7 doctors per 1,000 patients*

Focus on geriatric care

Shortage of medical institutions and with majority

present in urban areas

Technology promotion

Source: Health Systems Financing- World Bank Report6/20/2016

27

Twelfth Five Year Plan

Allocation three times greater than 11th five year plan

expenditure

Share of healthcare – 2.5% of GDP

Focuses on providing universal healthcare, strengthening

healthcare infrastructure, promoting research and

enacting strong regulations for the healthcare sector

6/20/2016

28

Budget allocation to health care (USD billion)

Source: Planning commission-http://planningcommission.gov.in/plans/planrel/12thplan/pdf/12fyp_vol2.pdf

6/20/2016

29

Union Budget 2016-17: Vikas ka budget

Allotments: Total: 31,300 Cr ( 1.58% of total)*

Medical, Public Health and Family Welfare (Rs.

5188.63 cr)

Rs.2077.55 cr for major central and medical

institutions

Rs.384 cr for medical education, training and

research

Rs.252.70 cr towards Ayurveda, Yoga and

Naturopathy Siddha and Homoeopathy.

Source: Union Budget 2016-Ministry of finance, GoI6/20/2016

30

Budget 2016-17 contd...

New health protection scheme - health cover up to one

lakh per family.

Prime Minister’s Jan Aushadhi Yojana- 3000 stores

‘National Dialysis Services Programme’ under National

Health Mission through PPP mode

6/20/2016

31

Budget 2016-17 contd...

Social Security and Welfare (Rs. 1,329.60 cr):–

Rs. 760.16 cr for pension and other benefits to freedom

fighters,

Rs. 61.03 cr for child and women welfare and

Rs. 67 cr for the welfare and empowerment of persons

with disabilities.

Census, Surveys and Statistics- Rs808.81 cr

6/20/2016

32

Union Budget Proposal 2016-17

1.5%

6/20/2016

33

Shortfalls

Increasing the public expenditure as proposed by 12th

five year plan to over 2.5 per cent - not been met

Long way in achieving universal health coverage from

burgeoning healthcare costs

Efforts to reduce the manpower and skill gap were also

missing from the budget

Reforms in health care sector is necessary6/20/2016

34

Guidance for strengthening public expenditure management

Strengthened budget formulation process

Enhanced government capacity for efficient public

expenditure management and monitoring

To generate expenditure priorities and arbitrate between

competing needs for scarce resources and reflect

government policy objectives

6/20/2016

35

Health care financing

Financing is the most critical of all determinants of a health

system

WHO – “function of a health system concerned with the

mobilization, accumulation and allocation of money to

cover the health needs of the people, individually and

collectively, in the health system”

to ensure that all individuals have access to effective public

health and personal health care

6/20/2016

36

Principles of a health financing system

• Have to be collected equitably and efficiently

Revenue collection

• costs of health care are shared by all and not borne by individualsPooling

• Used to buy or provide health interventions that are allocatively and technically efficient

Purchasing

6/20/2016

37

Action 1:

Establishing the vision

Action 2:

Situational

analysis

Action 3:

Financial

assessmentAction

4: Constrai

nt assessme

nt

Action 5:

Strategy for

change

Action 6:

Implementation

Action 7:

Monitoring and

Evaluation

Decision Process of Health Financing

Source: Health systems financing-The path to universal coverage - WHO

38

Models of healthcare financing

Beveridge model

Bismarck Model

National Health

Insurance Model

The Out of Pocket Model

Source: Health Systems financing. Report - World Bank. 6/20/2016

39

Sources of health care financing

The tax-based public sector

Out of Pocket Expenditure

Insurance- social, community- based, private

External financing

6/20/2016

40

Borrowing

Corp Tax

Income tax

Service tax

Nondebt capital

Customs

Sources of tax based Income (%) – India 2015-16

6/20/2016

41

Out of Pocket ExpenditureSimplest form

Main financer of health services in India is individual

household

Consequences:

Lower the access to health care

Impoverish the households

6/20/2016

42

Insurance

Most complex mechanism of financing health care

Objective - manage the revenues equitably and

efficiently allowing for subsidies from healthy to

unhealthy, rich to poor and productive workers to

dependents

6/20/2016

43

• Employees State Insurance Scheme (ESIS) and the Central Government Health Services (CGHS)

Social Health Insurance (SHI)

• Generally preferable to out of pocket expenditure

• Increase financial protection and access

Private Health Insurance

• Not-for-profit prepayment plans Community Health Insurance

6/20/2016

44

Criteria for choosing the financing system

Risk pooling

EquityEconomic Effects

6/20/2016

45OOP 80%40%

20%

Health system financing trends:

46

Health care financing in India

Health sector - high maternal and child mortality, dual

burden of communicable & non-communicable diseases

Hospitalization for major illness is a cause of

indebtedness for all income groups

Inability of the poor to access good health care

6/20/2016

47

Private Public Others

Debt financing Annual govt budget for

rural health

Foreign

donations

Foreign direct

investment

Annual govt budget for

urban health

PPP project

funding

External

commercial

borrowing

Govt. funding for

community programmes

Individual investors Govt. sponsored

schemes

Avenues of Health care financing- India

48

Factors influencing health care financing in India

Demography data

Economic Recession

Expectations from health care

Drive for Equity

Changing disease pattern

6/20/2016

49

Health financing issues in India

Low level of public health expenditure

18% - no access to OPD services*

40% have to sell their assets or borrow to pay the bill*

A mismatch between policy and practice – eg. NACO,

RNTCP

Weak absorption capacity in the government

Budgeting - not functional

Source: NSSO- 2011

6/20/2016

50

Indicators (2014) Value (US$)

Total Health Expenditure (THE) - % (GDP) 5

General Government Health Expenditure

(GGHE) as % of Total Health Expenditure

30

Private Health Expenditure (PvtHE) as % of

Total Health Expenditure (THE)

70

Health expenditure series. Global health expenditure database. WHO

Financial indicators in health care-India

6/20/2016

51

Indicators (2014) Value (US$)

Out of Pocket Expenditure (OOP) as % of

Total Health Expenditure (THE)

62

General Government Health Expenditure

(GGHE) as % of GDP

1.2

Total expenditure on health 97,140

million

General government expenditure on health 29,177

million

Source: Health expenditure series. Global health expenditure database. WHO

Financial indicators in health care-India

6/20/2016

52

Fig: Trends in centre-state share % in TPHE on health

Source: National Health Profile - 20156/20/2016

53Source: National Health Profile - 2015

Fig: Composition of public expenditure on medical and public health

6/20/2016

54

National Health Accounts (NHA)

Consistent, comprehensive information of all the

resources that flow through the country’s health system

over time

Standard management tool for situation analysis,

planning, monitoring and evaluation purposes

6/20/2016

55

NHA address four basic sets

of questions:

where do resources come

from

where do they go

what kinds of services and

goods do they purchase

whom do they benefit

6/20/2016

56

Six dimensions are considered:

Financing sources

Financing agents

Providers

Functions

Cost of Factors of Production

Beneficiaries

6/20/2016

57

Conclusion

Countries have to move forward faster to develop

equitable and efficient institutional structures, revenue-

raising mechanisms and spending prioritizations

To become more efficient and equitable in the use of

resources

Need for constant re-evaluation and adjustment

6/20/2016

58

References Hanlon JJ, Pickett GE. Public Health – Administration and

Practice. 8th ed.USA: Times Mirror; 1979.p.

Sathe VP, Doke PP. Epidemiology and management of

HEALTH CARE. 4th ed. Mumbai (INDIA): Vora Medical

Publications;2014.p.

Detels R, Beaglehole R, Lansang MA, Gulliford M. Oxford

Textbook of Public Health. 2nd ed. United Kingdom: Oxford

University press;2001.p.

Health Systems Financing- World Bank [Online] 2016 [Cited on

2016 Jun 10];Available from:URL: http://web.worldbank.org/6/20/2016

59

References Balwar R, Vaidya R, Tilak R, Guptha RK, Kunte R. Textbook of Public

Health and Community Medicine. 1st ed. Department of community

medicine, AFMC, Pune in collaboration with WHO India office.New

Delhi (India); 2009. p.

Schieber G, Baeza C, Kress D, and Maier M. Financing Health Systems

in the 21st Century [online] 2006 [Cited on 2016 Jun 2] ];Available

from:URL: http://www.ncbi.nlm.nih.gov/books/NBK11772

Health Systems Financing - Toolkit on monitoring health systems

strengthening. World Health Organisation [Online] 2008 [Cited on 2016

Jun 4];Available

from:URL:http://www.who.int/healthinfo/statistics/toolkit_hss/EN_PD

F_Toolkit_HSS_Financing.pdf

6/20/2016

60

References Budget in parliament- procedure. Ministry of Finance, GoI

[online] [Cited on 2016 Jun 2];Available from:URL: http://www.parliamentofindia.nic.in/ls/intro/p4.htm

BUDGET MANUAL- 2016-17. Ministry Of Finance. Department Of Economic Affairs, Budget Division, New Delhi [online] 2016 [cited on 2016 Jun 10];Available from: http://finmin.nic.in/the_ministry/dept_eco_affairs/budget/Budget_Manual.pdf

Srinivasan R. Health Care in India – Vision 2020, Issues and Prospects – Planning Commission. Planning Commission. Nic [Online] 2012 [Cited on 2016 Jun 10];Available from: URL: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3714944/

6/20/2016

61

References

Financing and Delivery of Health Care Services in India. National Commission on Macroeconomics and Health. Ministry Of Health And Family Welfare Government Of India & WHO [Online] 2005 [ Cited on 2016 Jun 4];Available from: URL: http://www.who.int/macrohealth/action/Background%20Papers%20report.pdf

Healthcare Union Budget 2016- Post-Budget sectoral point of view. Health Care. KPMG- India [Online] 2016 Mar [Cited on 2016 Jun 10];Available from:URL: https://www.kpmg.com/IN/en/services/Tax/unionbudget2016/Documents/Healthcare.pdf

6/20/2016

62

References Choudhury M, Nath HKA. An Estimate of Public

Expenditure on Health in India. National Institute of Public Finance and Policy (NIPFP) [online] 2012 May [Cited on 2016 Jun 4];Available from:URL: http://www.nipfp.org.in/media/medialibrary/2013/08/health_estimates_report.pdf

Healthcare Infrastructure and Services Financing in India- Challenges. Indian Chamber of Commerce [Online] 2012 Sep [Cited on 2016 Jun 10];Available fom:URL:https://www.pwc.in/assets/pdfs/publications2012/healthcare_financing_report_print.pdf

Kurian OC. Financing Healthcare for all in India: Towards a Common Goal. OXFAM India [Online] 2015 [Cited on 2016 Jun 4];Available from: URL: https://www.oxfamindia.org/sites/default/files/WP-Financing-Healthcare-for-All-In-India-29-05-2015-EN_0.pdf6/20/2016

63

References Adedigba MA. Health Care Costs and Comparison of

Different Methods Of Financing Health Care. Organisation of African Unity [online] 2011 [Cited on 2016 Jun 4];Available from:URL http://www.oauife.edu.ng/wp-content/uploads/2013/05/Health-Care-financing-by-Adedigba.doc

National Health Accounts 2004-05. National Health Accounts Cell. MoHFW-GoI [online] 2004 [2016 Jun 4];Available from:URL: http://planningcommission.nic.in/reports/genrep/health/National_Health_Account_04_05.pdf

NHA Indicators- Health expenditure series. Global health expenditure database. WHO [Online] 2015 [cited on 2016 Jun 12]; Available fom:URL: http://apps.who.int/nha/database/ViewData/Indicators/en

6/20/2016

64

References

Health financing for universal coverage- Health financing country diagnostic. A foundation for national strategy development. WHO [Online] 2010 [Cited on 2016 Jun 10]; Available from:URL: http://www.who.int/health_financing/tools/diagnostic/en/

India tries to break cycle of healthcare debt. Bulletin of the World Health Organization [Online] 2010 [ Cited on 2016 Jun 12];Available from:URL: http://www.who.int/bulletin/volumes/88/7/10-020710/en/

Approaches To Budget Reform. World Bank Report. [Online] 2012 [Cited on 2016 Jun 6];Available from:URL: http://siteresources.worldbank.org/INTPEAM/Resources/part3.pdf

6/20/2016

65

It is well enough that people do not understand the

monetary system, for if they did, there would be a

revolution before tomorrow morning

- HENRY FORD

THANK YOU

6/20/2016