Health Spending and Inequality in the Emerging Economies:

Health Spending and Inequality in the Emerging Economies: India, China, Russia, and Indonesia in Comparative Perspective Eduardo J. Gómez

Author: Dr. Eduardo J. Gómez, Senior Lecturer in International Development and Emerging Economies at King s International Development Institute, London, UK. Supported by: This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union. This report has been developed with the assistance of Oxfam in order to share research results and to contribute to debate on development and humanitarian policy and practice. The content and views expressed in this report are the responsibility of the author and do not necessarily represent the views of Oxfam.

Table of Contents Acknowledgements 4 Acronym Glossary 5 Executive Summary 6 Introduction 10 Health Spending and Inequality 13 Comparative Health Assessments in India, China, Russia, and Indonesia 15 India 18 China 26 Russia 37 Indonesia 46 Conclusion and Policy Recommendations 60 Policy Lessons 65 References 67

ACKNOWLEDGEMENTs In writing this report, I wish to thank several individuals for their invaluable feedback, support, and guidance. Namely, Thomas Dunmore Rodriguez at Oxfam GB in Mexico City, Mexico; Oommen Kuria at Oxfam India, Subrat Das and Protiva Kundu at the Centre for Budget and Governance Accountability in New Delhi, India; in China, Lucy Jiang, and Li Yurong at Oxfam Hong Kong and Lanying Zhang, in Beijing; Oleg Kucheryavenko at GCAP Russia and Daria Ukhova at Oxfam GB in Moscow, Russia; and Beka Ulung Hapsara of the International NGO Forum on Indonesia Development (INFID) in Pasar Minggu, Indonesia, as well as Roysepta Abimanyu of Oxfam GB in Jakarta, Indonesia. All of these individuals were wonderful in providing feedback on various portions of the draft report, as well as providing important empirical data. I am particular grateful to Thomas Dunmore Rodriguez for his guidance, patience, and encouragement in restructuring and concluding this study. Finally, I wish to thank my colleague Andrés Mejía Acosta at the International Development Institute at King s College London for his helpful suggestions in revising this report. 4

Acronym Glossary ASHA BJPS BPL BRICS CCTs CGHS DALY DLO ESIS FMF GIS GP ICDS IMF KARS LIS LMHI MFA MHFW MSA NCMS NHAM NHRC NHS NPPH NRHM ONLS OOP PKH RSBY SARS SJSN SOE SUS UEBMI URBMI VZN Accredited Social Health Activists Badan Penyelenggara Jaminan Sosial Basic Poverty Line Brazil, Russia, India, China, and South Africa Conditional Cash Transfers Central Government Health Scheme Disability-Adjusted Life Year Additional Medicines Supply Program Employee s State Insurance Scheme Federal MHI Fund Government Insurance System General Practitioner Integrated Child Development Services International Monetary Fund Komisi Akreditasi Rumah Sakit Labor Insurance System Law of Mandatory Health Insurance Medical Financial Assistance Ministry of Health & Family Welfare Medical Savings Account New Rural Cooperative Medical Scheme National Health Assurance Mission National Human Rights Commission National Health Service National Priority Project-Health National Rural Health Mission Essential Drug Program Out-of-Pocket Expenses Program Keluarga Harapan Rashtriya Swasthya Bima Yojana Severe Acute Respiratory Syndrome Sistem Jaminan Sosial Nasional State Owned Enterprise Sistema Único de Saúde Urban Employee Basic Medical Care Urban Resident s Basic Medical Insurance Program Seven Nosologies Program 5

Executive Summary In recent years, the emerging economies of China, India, Russia, and Indonesia have sought to increase healthcare spending and introduce legislation that improves both access to and the overall quality of healthcare. In each of these nations, political leaders have come to realize an imminent link between improved healthcare and sustainable economic growth, peace, and prosperity. Increased healthcare spending is also believed to be associated with an overall reduction in inequality, such as in the areas of income, consumption, gender, geography, and health. This is due to the additional income gained from improved access to public health services, better health, longer working hours, and in some instances financial protection through national health insurance programs. Testing the empirical validity of these linkages has received scant attention in the emerging nations, both within governments as well as the policy and scholarly community. This report seeks to fill in this lacuna by exploring the extent to which increased healthcare spending in India, China, Russia, and Indonesia is associated with a reduction in inequality. In this report, inequality is defined as the broader differences between the rich and poor in social, economic, and educational wellbeing; differences between the rich and poor in the areas of income and consumption; differences between women and men in access to healthcare; inter-state and within-state differences in economic development, healthcare infrastructure and human resources (e.g., doctors and nurses); and differences between the rich and poor in financial protection from out-of-pocket (OOP) expenditures (i.e., periodic individual expenses for health prevention and treatment services, such as co- payment fees, fees for exams and medical procedures) and catastrophic expenses (e.g., a high amount of personal expenses for - often sudden - healthcare treatments) through targeted health insurance programs for the poor. This report finds that government spending for public health and publically-funded national health insurance, though different in the level and sources of financing, has been a positive factor associated with a gradual reduction in inequality. While government spending for health insurance has helped to reduce inequality, it is important to emphasize that health insurance spending has been limited in its ability to ensure complete coverage for the poor, in turn requiring a reform of insurance programs in order to ensure that the poor do not have to contribute financially to the system. Indeed, because national health insurance programs often entail contractual coverage through private insurers and co-payments, the poor often experience ongoing out-of-pocket expenses and/or catastrophic expenses that in many instances forces them into greater poverty, or essentially costs them out of insurance coverage and healthcare altogether. However, it is important to emphasize that India, China, Russia, and Indonesia have varied in the timing and extent of reductions in inequality. In India and China, evidence suggests that increased spending for the public health system and publically-funded national health insurance programs has improved income and consumption among the poor, thus closing the gap between the rich and poor in income and consumption levels, especially in rural areas. In Indonesia, despite low levels of central government spending and increased inequality throughout the 1990s up through the mid-2000s, recently spending for the public health system as well as a 100% publically funded national health insurance program targeting the poor has increased considerably and has revealed a positive association with improved income and consumption patterns among the poor. In Russia, this positive association between spending and inequality has yet to arise, due mainly to insufficient financial commitments. Furthermore, the government has recently planned to reduce healthcare spending, which could 6

widen general inequality patterns all the more. These differences in outcomes are attributed to differences in political interests and incentives, where India, China, and Indonesia s governments have realized that public health and publically-funded national health insurance spending is vital for individual prosperity, productivity, and economic growth, even more so in the case of Indonesia with the emergence of direct presidential elections, effective social health movements, pressures and incentives for continued spending. In Russia, in contrast, the political leadership has not held the same view and political incentives, in turn leading to a decline in financial and political commitment to public spending in health. Several challenges nevertheless remain. First, with respect to publically-funded national health insurance programs providing financial protection for the poor, out-of- pocket (OOP) and catastrophic expenses continue to increase in India, China, and Russia. This is mainly the result of these governments lack of attention to the monitoring and regulation of corrupt medical practices, such as the prescription of unnecessary medication and examinations, lack of outreach to the poor who are eligible for insurance benefits, as well as these programs incomplete coverage of all inpatient and outpatient services. Conversely, Indonesia s government has achieved these endeavors, in turn resulting in a reduction in OOP and catastrophic expenses among the poor. Second, this study suggests that not only the amount of funding matters but also the institutional modalities through which this funding is located, with some geographic areas doing better than others, such as urban governments versus rural. Finally, while women s access to health has improved due to the increased availability of public health services and publically-funded national health insurance programs, ongoing discrimination and lack of attention to women s healthcare needs has impeded their ability to benefit from these programs. Because of these challenges, this study concludes that while increased central government spending for public health systems and publically-funded national health insurance programs is necessary for helping reduce inequality, more funding needs to be allocated for improved inter-governmental coordination for policy implementation, investments into infrastructure and human resources, government regulation of hospital practices, and government outreach to the poor and women to ensure that they receive the healthcare benefits they are entitled to. The research conducted for this study was based on secondary published literature, such as reports, books, and journal articles. An extensive theoretical literature review of the linkages between healthcare spending and inequality was also conducted. Quantitative data, such as budgetary expenditures and health indicators, were used to support empirical claims as well as graphs; this data was obtained from published reports, articles, and health ministries in each of the nations examined. Based on the reported evidence, this report makes several policy recommendations to reduce inequality through health spending in India, China, Russia, and Indonesia. Specifically, the following is recommended: Central governments must continue to increase spending for public health and invest more in the public health system rather than national health insurance programs; achieving this can increase access to quality and effective universal healthcare; However, governments must combine increased spending with the simultaneous strengthening of institutions, such as healthcare infrastructure, human resources, as well as inter-governmental policy coordination and government regulation of hospital and clinical practices. Strengthening these institutions is vital for ensuring a linkage between healthcare spending and reduced inequality; 7

At the same time, central and local health officials should work together to locate and educate the poor and women on their healthcare rights, benefits, and where they can go to receive prevention and treatment services. Governments should complement these efforts with financial assistance to those in need of funding for travel to obtain healthcare. These efforts can help individuals obtain the health and financial benefits associated with increased healthcare access, in turn providing the poor with additional income and the time needed to improve their economic and social positions; In order to ensure that these outreach roles pay off, however, central governments should invest more in increasing the regulation of public and private hospital malpractice, such as physicians prescriptions of unnecessary medications and tests. Otherwise the poor s increased registration for voluntary insurance programs may not help them to avoid OOP and catastrophic expenses. Central and local health officials should explore various ways of monitoring, reporting, and disciplining public and private sector doctors for engaging in corrupt activities; Given the large size of distant (and at times inaccessible) rural areas in these nations, central governments should create incentives for local health officials to work harder in reaching out to and providing healthcare services to the poor. In addition to providing financial incentives for those healthcare workers in remote areas, state and provincial health departments should receive national and possibly international recognition for their efforts to service remote areas, as well as financial benefits by way of increased fiscal transfers for health and other social services. 1 Central government recognition could go a long way in motivating greater outreach efforts and, consequently, increased access to healthcare and reduced inequality; Given the effort to ensure universal health insurance coverage in these nations, governments must ensure that increased spending guarantees coverage for all inpatient and outpatient services. Universal coverage cannot be achieve if the poor continue to experience out-of-pocket and/or catastrophic expenses, which could discourage them from seeking more healthcare services. To avoid this, existing health insurance legislation must be amended so that all socioeconomic classes benefit from the insurance policies that they have access to; Central governments must also strive to ensure that women have greater access to meaningful healthcare. In a context where government-sponsored health insurance programs continue to pose challenges for accessing healthcare due to high co- payment fees and catastrophic expenses, when prioritizing family budgets and spending, women have historically received the least amount of consideration and influence in family budgetary allocations, in turn leaving them dependent on men, with little to no financial support for participating in insurance programs. Going forward, governments must strive to address this challenge and to find ways to work with families in order to establish greater equality in how household budgetary and healthcare decisions are made, while exploring what national and local governments can do to further empower women; 1 In the state of Ceará in Brazil, for example, during the 1990s municipal government officials often provided local recognition and prizes for the best performing fire fighters and social workers; this, in turn, created incentives for civil servants to increase the quality and overall effectiveness of their services (Tendler, 1997). 8

In order to increase social awareness and accountability in the linkage between increased healthcare spending and inequality, governments should encourage greater civil societal mobilization, establish formal institutional linkages between the state and civil society (e.g., national and sub-national representative committees), and work with civil society in reaching out to and encouraging the poor and women to take greater advantage of the healthcare services available to them; And finally, more than ever, social health movements, NGOs, CBOs (community based organizations), human rights activists, scientists, and academics must work together to closely monitor and report government commitments to increased healthcare spending, as well as how this spending is being used and its direct linkage to reductions in inequality. NGOs, CBOs, activists, scientists, and academics in turn must strive to publish their findings, either through journalistic or social media venues, through international conferences and meetings, while maintaining their efforts to pressure and work with the government for greater spending. 9

Introduction In recent years, many of the newly emerging economies, such as the BRICS (Brazil, Russia, India, China, and South Africa), have realized that increased spending for healthcare is a vital component of economic growth and prosperity. But to what extent has this spending been associated with an overall reduction in inequality? This question is particularly relevant when we consider the fact that economic, social, and gender inequalities persist in most of these and other emerging economies (OECD, 2011). This report addresses this question by conducting a comparative analysis of India, China, Russia, and Indonesia s 2 central government spending for public health systems, 3 publically-funded national health insurance programs, 4 and their association with reduced income and consumption inequality, gender, geographic, and health-related economic inequalities. In general, this comparative analysis finds that government spending for public health systems and publicallyfunded national health insurance programs, though different in the level and sources of financing, has been a positive factor associated with a gradual reduction in inequality. While government spending for national health insurance programs has helped to reduce inequality, it is important to emphasize that health insurance spending has been limited in its ability to ensure complete coverage for the poor, in turn requiring a reform of insurance programs in order to ensure that the poor do not have to contribute financially to the system. This problem is mainly due to the fact that publically-funded national health insurance programs often entail contractual coverage through private insurers and co-payments; consequently, the poor often experience ongoing out-of-pocket and/or catastrophic expenses that in many instances forces them into greater poverty, or essentially costs them out of insurance coverage and healthcare altogether. The reason for this limitation becomes clearer when we consider the fact that there generally exists three types of health insurance models: first) a national publicly-subsidized health insurance model, with 100% of all expenses subsidized by the national government through general taxation revenues as seen with Mexico s Seguro Popular program, Brazil s Sistema Único de Saúde (SUS), and the United Kingdom s National Health Service (NHS); second) a mixed government and individual contributory national insurance model, where the government, employers, and individuals contribute a share of their income to funding programs; and third, an entirely private sector insurance scheme through individual purchasing of insurance plans. In India, China, Russia, and Indonesia, most publicly-funded national health insurance programs follow the second option, where, while governments contribute a large percentage of funding, individuals are still required to pay premiums for coverage. 2 The case of Brazil was omitted in this study in order to focus on other nations that have not received as much attention on the issue of health policy spending and inequality; this issue is, of course, still important in Brazil and should be an area of future comparative research. 3 In this report, the term public health systems will refer to tax-financed spending for the prevention and treatment of diseases through specified programs, as well as funding for healthcare infrastructure, such as beds, machinery, and human resources. 4 In this report, the term publically-funded national health insurance programs will refer to national health insurance programs financed by the government, as well as employers, employees, and civil society, and national programs targeting the poor, providing financial protection against excessive healthcare expenses. 10

This report also highlights the fact that government spending for public health systems and publically-funded national health insurance programs vary in the source and depth of financing and coverage. Public health spending entails the government s complete 100% financing of health programs (prevention and treatment services), infrastructure, and human resources through the usage of tax revenues. In contrast, health insurance financing varies in the depth of public, individual, and private financial contributions, as mentioned above. Unfortunately, however, because publically-funded national health insurance programs often requires coverage through private insurers and co-payments, the poor often either refrain from participating due to high costs or experience catastrophic expenses that in many instances forces them into greater poverty. Therefore, to ensure that government spending avoids this issue and continues to reduce inequality, governments should either completely subsidize national health insurance for all through taxation revenue or focus on investing more resources into the public health system, available to all at no cost. When compared to each other, this report finds that India, China, Russia, and Indonesia have varied in the timing and extent of public health system and publically-funded national health insurance spending contributing to reductions in inequality. In India and China, evidence suggests that increased spending for public health systems, such as entirely government-subsidized prevention, treatment, and medical infrastructure, as well as publically-funded national health insurance programs has been associated with an improvement in income and consumption patterns among the poor, especially in rural areas, in turn gradually reducing inequality between the rich and poor. In Indonesia, despite low levels of central government spending and increased inequality during the 1990s up through the mid-2000s, more recently government spending for the public health system as well as publically-subsidized national health insurance programs, especially those targeting the poor, has increased and has revealed a positive association with reduced income and consumption inequality between the rich and poor. In Russia, however, insufficient government spending for the public health system and publically-funded national health insurance programs has been associated with worsening income and consumption inequalities. What s more, the Russian government has recently planned to further reduce healthcare spending, which could increase general inequality patterns. The improvements seen in India, China, and Indonesia reveal an increased level of political attention and commitment to public health spending as well as publically-funded national health insurance spending, with governments viewing both as an important component of social and economic development. These governments nevertheless vary considerably with respect to the locus of political accountability and incentives for healthcare spending: while China and India s interests have reflected political leaders concerns rather than the collective interests and pressures of civil society (though civil society s role in India has increased in recent years), Indonesia s introduction of open presidential elections in 2009 increased the president s political incentives for greater healthcare spending, in turn addressing years of inadequate healthcare financing, especially for the poor. In this context, civil societal pressures in Indonesia for increased spending has been important for furthering presidential interests and commitment to spending. In contrast, the isolation of Russia s political leadership from international and domestic political pressures, lack of accountability and absence of civil societal pressures has made increased spending more reliable on presidential interest and leadership. Unfortunately, the current presidential administration has demonstrated a low level of commitment to increased healthcare spending, which could worsen inequality levels all the more. Despite promising results in India, China, and Indonesia, several challenges remain. When it comes to publicallyfunded national health insurance programs targeting the poor and providing financial protection, while spending has increased for these programs, India, China, and Russia continue to see a rise in out-of-pocket (OOP) and catastrophic spending among the poor; Indonesia was the only nation to avoid these problems, seeing a substantial decline in OOP and catastrophic expenses among the poor following increased spending for 11

insurance programs targeted at them. In India, China, and Russia, a lack of inter- governmental bureaucratic coordination for effective policy implementation, lack of federal oversight and regulation over corrupt medical procedures (such as doctors charging for unnecessary medical procedures and excessive, costly medication), as well as health officials unwillingness to reach out to, educate, and encourage the poor and women to use their health insurance benefits has contributed to rising OOP and catastrophic expenses. Conversely, Indonesia s government not only coordinated more with the provinces for policy implementation, but ministry of health officials have also closely regulated hospital procedures while ensuring complete coverage for all inpatient and outpatient services. In addition, geographic differences in urban versus rural access to adequate healthcare infrastructure and human resources continues to pose a challenge. While Indonesia and China s governments have recently addressed these issues through the financing and expansion of hospitals and clinics in rural areas, more spending is needed, especially for guaranteeing an adequate supply of general practitioners, nurses, and medical workers in rural areas. Finally, while women now have greater access to maternal and primary healthcare services in India, China, Russia, and Indonesia due to increased public health system spending, in all of these nations women are still subject to social and household discrimination, in turn hampering their access to adequate healthcare. These governments therefore need to invest more in creating innovative policies that address ongoing discrimination towards women, while encouraging them to take full advantage of their rights to health prevention and treatment. These ongoing challenges reveal a key finding in this study: that is, while central government spending for public health systems and publically-funded national health insurance programs is necessary and is positively associated with a gradual reduction in inequality, governments must also ensure that sufficient funding is going towards the construction of inter-governmental policy coordination, healthcare infrastructure and human resources (especially in rural areas), policy regulation, and programs reaching out to and helping the poor and women obtain the healthcare benefits that they are entitled to. 12

Health Spending and Inequality The issue of whether or not increased healthcare spending has a positive affect on reductions in inequality has been an ongoing debate in the academic literature. Several studies have emerged suggesting that an increase in government spending for healthcare, as well as the provision of targeted social insurance programs (e.g., conditional cash transfers - CCTs), can help to improve the poor s wealth and prosperity (OECD, 2009). In the area of public health, increased access to primary care, prevention services, and medical treatment can provide families with the additional income needed to purchase other goods and services, in turn improving their overall quality of life (ibid). Access to free public healthcare services also provides the additional income needed to save and accumulate assets, which, in turn, can help improve the poor s income, consumption and savings, while preparing for any potentially unexpected medical expenses (ibid). Increased access to public health services and enrollment in specific health insurance programs providing financial security may lead to additional income benefits, which others have found to be associated with other kinds of social welfare programs (Verbist et al. 2012). In addition, some have argued that specific health care programs, such as the government s provision of childcare services, can provide poor family members with the additional time needed to work more hours and raise their income (Richardson, 2013). There is also evidence to suggest that access to health and other social welfare services through CCTs can encourage the poor to engage in entrepreneurial business activities and/or new career endeavors, thus enhancing their potential for self-sufficiency, productivity, and increased income (Gertler et al. 2005; Gwatkin, 2002). All of these benefits has convinced development economists that increasing healthcare spending not only helps to reduce inequality and poverty but also a nation s economic growth trajectory (Bloom et al., 2004; Sachs, 2002). Recent findings from India, China, and Indonesia in this report appears to support this literature, illustrating that there is indeed a positive association between increased government spending for public health systems and publically-funded national health insurance programs and improvements in income and consumption inequality between the rich and poor. As seen in these countries, in recent years government spending for the provision of prevention and treatment services in hospitals and clinics appears to have proviwded the health, energy, and time needed to gradually improve the poor s income and consumption of goods. Others claim that increased central government spending for the provision of health insurance coverage protecting the poor from catastrophic expenses can improve their economic security. For example, several claim that the poor stand a better chance of increasing their earnings and savings when health insurance programs focused on financial protection reduces their out-of-pocket expenses for medical care and/or allows them to avoid catastrophic expenses (Wagstaff and Pradhan, 2005; Jowett et al. 2003; Gupta and Keen, 2014). It has been argued that increased fiscal transfers from the central to state and municipal health departments for these programs can lead to the distribution of health insurance cards, which the poor can then use to access services and avoid out of pocket expenses as seen in Thailand and India (ibid; Joumard et al. 2010). With reduced healthcare expenditures, the poor have more available income for the purchase of food, clothing, and improved housing situations, thus not only enhancing their income status but also their overall health and wellbeing (Wagstaff and Pradhan, 2005). Empirical evidence from India and China in this report nevertheless questions these assertions. Studies suggest that despite an increase in government spending for specific publically-funded health insurance programs 13

targeting the poor and offering financial protection from OOP and catastrophic expenses, with the exception of Indonesia, these governments are still experiencing an increase in these expenses among the poor. Furthermore, the voluntary nature of these programs, as seen in India with the RSBY program of 2009, has unfortunately not yet achieved its goal of avoiding OOP and catastrophic expenses. In China, OOP and catastrophic expense have also continued to rise, notwithstanding a surge in federal spending for insurance programs offering financial protection. These findings lend credence to recent studies claiming that voluntary health insurance programs often leave the poor behind (Oxfam, 2013). As explained in greater detail shortly, these outcomes can in large part be attributed to weak inter-governmental policy coordination and the governments failure to carefully regulate the prescription of medical procedures and medicine; only Indonesia s government was able to achieve this, which in turn has helped the poor avoid OOP, catastrophic expenses, while decreasing inequality levels between the rich and poor in the area of individual healthcare financing. Despite the benefits associated with increased healthcare spending, some caution that there are ongoing challenges to ensuring that such spending reduces inequalities. In addition to those claiming that federal governments still do not provide an adequate amount of funding, governments still have a difficult time accurately targeting their expenditures, i.e., ensuring that funding is appropriately allocated to program beneficiaries (Crombie et al., 2005). Some claim that federal spending is most effective when fiscal transfers to the states are explicitly designed to meet the particular needs of disadvantaged groups, such as the poor (European Commission, 2013; OECD, 2011; Gupta and Keen, 2014; Mechanic, 2002; Pons-Vigués et al., 2014). While financial targeting is important, this study highlights other challenges complicating the linkage between increased spending and reduced inequality. First, governments need to simultaneously invest in healthcare infrastructure and human resources in urban and, especially, rural areas. Findings from India, China, Russia, and Indonesia suggest that health spending s affects on inequality could further increase if the poor in urban and rural areas had greater access to hospitals, clinics, the latest medical technology, as well as an adequate number of doctors, nurses, and healthcare personnel. And with respect to publically-funded national health insurance programs providing financial protection for the poor, another challenge - seen in India and China - is the inability of ministries of health to regulate public and private hospitals and enforce insurance benefits a challenge that Joumard (et al. 2010) has stressed in other work; as seen in Indonesia, this process entails closely monitoring public and private hospitals to ensure that doctors and healthcare staff are meeting needs and not engaging in corrupt practices, such as prescribing unnecessary medications and tests, which contributes to OOP and catastrophic expenses. Finally, to increase access to public health services while providing financial protection through health insurance, findings in this report suggest that central and state healthcare officials need to be more proactive in locating and reaching out to the poor and women. Doing so helps to educate the poor and women on the types of healthcare benefits that they are entitled to, where and how they can go to receive them. Achieving this process can help to increase the poor and women s participation in health programs while further increasing spending s positive affects on reduced inequalities. Thus, this study underscores the fact that in addition to increased healthcare spending, nations must also allocate greater funding to strengthen healthcare infrastructure, human resources, policy regulation, and government outreach. In other words, simultaneously building effective institutions is critical for ensuring a strong positive association between increased healthcare spending and reduced inequality. 14

Comparative Health Assessments in India, China, Russia, and Indonesia Graph 1: General Government Expenditure on Health as % of Total Government Expenditure in India, China, Russia, and Indonesia (1995-2012) 20 15 10 5 South Africa China India Russia Brazil 0 1995 2000 2005 2010 Source: WHO, Global Health Observatory, 2014 As emerging economies strive to enhance their economic prosperity and global influence, China, India, Russia, and Indonesia s governments have realized that increased healthcare spending is an integral aspect of this process. In recent years, and as Graph 1 illustrates, all of these nations have increased their spending for healthcare, specifically when measured in terms of government expenditures for health as a percentage of total government expenditures. Nevertheless, it is important to note that these nations have varied in the extent of their spending commitments. As Graph 1 illustrates, China has by far allocated more of its federal budget to health, followed by Russia, India, and Indonesia (WHO, Global Health Observatory, 2014). However, when one looks at these government expenditures over time, with the exception of China, all of these nations had reduced 5 DALY indicators are measured by taking the sum of the average years of healthy life lost to premature death plus the sum of the years lost to disability. 15

expenditures for several years, only recently exhibiting an increase in expenditures (ibid); moreover, in India and Indonesia, since 2010 government expenditures appears to have increased at a quicker pace when compared to China and Russia (ibid). Increased government expenditures for healthcare appears to be correlated with general improvements in health outcomes in India, China, Russia, and Indonesia. In all of these nations, and as Graph 2 illustrates, adult mortality rates between the ages of 15 and 60 years of age have decreased at a time when spending has increased (ibid). Furthermore, Graph 3 also shows that in all of these nations infant mortality rates have declined, along with an increase in government spending (ibid). And finally, and as Graph 4 illustrates, the average years of life lost to either death or disability, as measured through DALY 5 indicators, has declined in all of these nations (ibid); this has also occurred amidst an increase in government spending, suggesting that a variety of health programs have helped to improve the lives of India, China, Russia, and Indonesia s population. Graph 2: Adult Mortality Rate (probability of dying between 15 and 60 years per 1000 population) 350 300 250 200 150 100 Indonesia Russia India China 50 0 1990 2000 2012 Source: WHO, Global Health Observatory, 2014 16

Graph 3: Life Expectancy at Birth (years) 80 Indonesia Russia 70 India China 60 50 1990 2000 2012 Source: WHO, Global Health Observatory, 2014 Graph 4: Age-standardized DALY Rates 80 70 60 50 40 30 20 Indonesia Russia India China 10 0 2000 2012 Source: WHO, Global Health Observatory, 2014 While increased government expenditures for healthcare has been positively associated with overall improvements in health outcomes, have these expenditures also been associated with an overall reduction in various types of inequality? The following empirical sections address this question, highlighting how and to what extent this has occurred. 17

India India s healthcare system is a hybrid public, private system. While there is a public system providing care through state-run hospitals, as well as various income specific health insurance programs, there is also a thriving private healthcare sector. The public healthcare system, which is decentralized and governed by the state governments, comprises mainly 20% and 40% of outpatient and inpatient utilization services (La Forgia and Nagpal, 2012), with the rest falling under the private sector (ibid). Since 2001-2002, approximately 30% of the population was enrolled in private health insurance (ibid). In recent years, however, there has been a concerted effort to strengthen the public healthcare system (ibid). Indeed, the central government has considered an increase in public health spending to be a core aspect of its efforts to accelerate development and prosperity. As Graph 5 illustrates, central government expenditure on health as a percentage of total central government expenditures increased from 0.5% in 2001-2002 to 2.0 in 2010-2011, rising up to 2.2% in 2014-2015 (Center for Budget and Governance Accountability, 2014); and yet, this percentage of spending has been stagnant at around 2% for the last 7-8 years. And as Graph 7 illustrates, the state governments have provided the highest level of healthcare spending, which in turn reflects preexisting commitments to decentralization (Sing, 2008). Graph 5: India-Central Government expenditure on health as % of total Central Government expenditure 2.5 2.0 1.5 1.0 0.5 0.0 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (RE) 2014-15 (BE) Source: Center for Budget and Governance Accountability, 2014 6 Gini coefficients measure the distribution of income or consumption levels between individuals within a nation. This coefficient is typically measured from a scale of 0 to 100, with 0 indicating complete equality and 100 indicating complete inequality. 18

Graph 6: India-Total expenditure on health (Centre and State combined) as % of total government expenditure 4.0 3.5 3.0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (RE) Source: Center for Budget and Governance Accountability, 2014 Graph 7: India - Central and State Government Expenditure for Healthcare (in millions Rs. Crore) 80000 70000 60000 State Government Expenditure Central Government Expenditure 50000 40000 30000 20000 10000 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 RE 2013-14 BE Source: Center for Budget and Governance Accountability, 2014 19

Health Spending and Inequality In India, while differences in income between the rich and the poor were higher prior to political independence, these differences substantially declined during the socialist government years of the 1960s and 1970s, though increasing once again during the 1980s and 1990s (Basole, 2014). While income inequality has continued to increase since the 1990s, when compared to other nations, inequality levels have been relatively stable (ibid). This is especially the case if one considers India s Gini coefficient 6 for income, which in 1992 was estimated to be 0.3098, increasing slightly to 0.3103 in 2000, 0.337 in 2005, and 0.3284 in 2010 (Chotikapanich et al. 2014). Nevertheless, there is a considerable gap in the income earned between the top 1% and the bottom percentile, with the former s share of income increasing from 15.79% in 1992 to 17.38% in 2010 and the bottom 20% of income earners share decreasing albeit modestly - from 8.90% in 1992 to 8.46% in 2010 (ibid). However, it is important to note that the income share of the bottom 1% marginally increased from 0.25% in 2000 to 0.26% in 2010 (ibid). Moreover, the mean income in rural areas, which are generally considered to be poorer than urban areas, rose from 43.881 in 1992 to 54.600 in 2010 (ibid). And while income inequality in urban areas increased from a Gini indicator of 0.3433 in 1992 to 0.3926 in 2010 (ibid), inequality among low-income earners barely increased in poorer rural areas, from a Gini coefficient of 0.2863 in 1992 to 0.2937 in 2010 (ibid; Anand et al. 2014). With respect to poverty, the association between increased public health spending and poverty reduction is evident when one looks at the state government level. In Kerala, for example, studies suggest that increased government spending for public health, provided through the construction of local healthcare centers, helped to reduce poverty (Dowling and Chin-Fang, 2009); this is in large part due to state government spending s positive affect on ensuring that healthcare centers in Kerala are well attended by physicians, adequately supplied, maintained, and utilized (Keefer and Khemani, 2005). Similarly, others have found that the state governments of Tamil Nadu and Andhra Pradesh displayed a close association between increased spending for public health and an overall reduction in poverty (Shepherd et al. 2004). With respect to inequality, differences between the rich and poor with respect to per capita consumption levels within states appears to be improving. While historically inequality in consumption has been most acute between urban and rural areas within states versus between states, comprising 90% versus 10%, respectively (Krishna and Sethupathy, 2012), between 2000 and 2005, Krishna and Sethupathy (2012) find that within state urbanrural differences in consumption inequality, when measured in terms of household expenditures, have decreased (ibid). Although urban households consume more on average than their rural counterparts (due to higher economic growth and more opportunity), poorer rural households have gradually seen an increase in personal consumption, suggesting a potential decline in consumption inequality (Anand et al. 2014). In recent years, analysts maintain that much of the general improvement in poverty and inequality in India has been attributed to the introduction of social welfare policies (Anand et al. 2014). In fact, a recent study published by the IMF (International Monetary Fund) suggests that government expenditures, in particular social policy expenditures, are closely linked to inclusive growth and poverty reduction (ibid: 29). Therefore there appears to be a positive association between increased public health spending and reductions in general inequality. An area in which the central government has also increased its financial and political commitment is publically-funded national health insurance, especially programs that contribute to the government s goal of achieving universal healthcare coverage (Patel et al. 2011; Reddy et al. 2011). Since the mid-2000s, 20

central government funding has gone towards the establishment of several national health insurance programs; moreover, federal spending for these programs has increased from approximately 8,000 Rs. million in 2004-05 to 20,000 Rs. million in 2008-09 (La Forgia and Nagpal 2012: p. 20). It is important to emphasize, however, that the sources of funding for the public health system versus publicallyfunded national health insurance programs are different. Public health spending in India entails the usage of federal taxation revenues, which are then used to fund a host of programs ranging from the prevention and treatment of non- communicable diseases to epidemics, such as HIV/AIDS (Schaffer and Mitra, 2004). In contrast, and as discussed shortly, publically-funded national health insurance programs entail a mixture of federal financing through taxation revenues as well as contributions from employers and individuals, even the poor (La Forgia and Nagpal, 2012). Indeed, much like the United States and China, there does not yet exist a single payer, universal health insurance program, but rather a patchwork of different types of insurance programs financed and governed by different parts of the federal and/or state governments, for different segments of the population. At the central government level, three primary health insurance programs exist: the Employees State Insurance Scheme (ESIS), which provides insurance for private sector workers up to Rs. 15,000 per month; the Central Government Health Scheme (CGHS), which provides insurance for all federal civil servants; and the Rashtriya Swasthya Bima Yojana (RSBY) program, which provides coverage for those falling below the poverty line (La Forgia and Nagpal, 2012). All of these programs are mainly funded by the central government, through various taxation revenues (ibid). Of all these insurance programs, only the RSBY is voluntary and requires a RS. 30 registration fee (Oxfam, 2013). Families must enroll for the RSBY program and receive a RSBY card, which is then used at hospitals for inpatient (mainly) and outpatient services. Unlike CGHS, however, there is a cap on the amount and type of services that can be reimbursed through the RSBY program. Coverage for RSBY is caped at RS. 30,000 per year for families (ibid); conversely, the ESIS and CGHS programs have no such caps (La Forgia and Nagpal, 2012). The ESIS and CGHS also provide coverage for all inpatient and outpatient services. However, the RSBY program provides only limited coverage, such as for inpatient services for long-term treatment in hospitals - e.g., surgeries. This is because the RSBY program is focused mainly on avoiding catastrophic expenses for the poor. Consequently, RSBY does not provide as much coverage for outpatient expenses, such as the provision of medicines (ibid). Ambulatory care is also generally not covered by the RSBY program, while it is covered under the ESIS and CGHS programs (ibid). Thus at the central government level, inequalities persist in the scope of health insurance coverage and benefits between programs. This continues to create a sense of inequality between ESIS and CGHS versus RSBY beneficiaries. Alternatively, there are a plethora of state-government administered health insurance programs, which vary widely in terms of financing, coverage, and protection. Some examples include the Rajiv Aarogyasri program in the state of Andhra Pradesh, the Yeshasvini and Vajpayee Arogyashri programs in Karnataka, the Kalaignar program in Tamil Nadu, the RSBY Plus program in Himachal Pradesh, and the proposed Apka Swasthya Bima Yojana in the capital of New Delhi (ibid); the latter two programs use the Planning Commission s Basic Poverty Line (BPL) index to determine eligibility, while Tamil Nadu s Kalaignar program and Andhra Pradesh s Rajiv Aarogyasri program provides a more extensive list covering a larger segment of the poor population (ibid). Essentially all of these state-based health insurance programs provide reimbursement caps for families, primarily for inpatient catastrophic expenses (ibid). The depth of financial coverage for inpatient and outpatient services nevertheless varies for each state, depending on the state government s income and financial commitment level (ibid). 21

Government financing for these central and state government health insurance programs also vary. For central government programs, the government relies entirely on tax revenues to provide grants to state health departments (ibid). At the same time, the state governments fund their respective health insurance programs through their own taxation revenues, fiscal transfers from the central government, and transfers from the Ministry of Health & Family Welfare (MHFW) for centrally-sponsored programs (ibid). Until 2005, the central government s financial commitment to centrally-sponsored national health insurance programs waned, though this has increased in recent years. Perhaps the largest percentage of spending for health care comes from individuals. For example, out-of-pocket (OOP) expenditures for healthcare services has approximated 69%, with the bulk of this spending directed towards fee-for-services private providers, as well as user fees at public hospitals (ibid: p. 19); other studies suggest that these out-of- pocket payments have reached 80% (Prinja et al. 2012). In the past two decades, India has also seen a burgeoning growth of private health insurance providers and hospitals (Dréze and Sen, 2014). Thus in sum, the recent increase in central government expenditures for federal publically-funded national health insurance programs has come at a time when general income inequality between the states has been modest, when income for the bottom 1% has increased, and when consumption inequality has decreased. It is important to emphasize, however, that inequality in general has continued to rise since the 1990s, especially with respect to income between the rich and the poor (as mentioned earlier), and that a further increase in government spending for healthcare (and other social welfare programs) is necessary in order to help ensure that inequality declines. Graph 8: India - Central Government Spending for the National Rural Health Mission (NRHM) and RSBY Programs (Rs.Crore*) 25000 20000 RSBY (Rs. crore) NRHM (Rs. crore) 15000 10000 5000 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14(RE) 2014-15(BE) * 1 Crore= 10 million Source: Center for Budget and Governance Accountability, 2014 22