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UPSC MainsGeneral Studies Paper IIIEducation and HealthPractice question

Health Expenditure Efficiency and Public Financial Management

"India needs to spend better on health, not just spend more." Discuss with reference to primary healthcare and public financial management.

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How to approach

Introduce the context of India's low yet rising health spending and emphasize why allocative efficiency matters alongside fiscal expansion. Detail how prioritizing primary healthcare improves health equity and lowers out-of-pocket expenses. Examine public financial management (PFM) reforms, fund tracking, and procurement mechanisms that ensure expenditure quality, concluding with a balanced forward path.

Model answer

349 words

Introduction

While India's government health expenditure is gradually expanding to approximately 1.48% of GDP, achieving Universal Health Coverage requires far more than merely increasing outlays. Sustainable health equity depends on enhancing allocative efficiency and implementing robust Public Financial Management (PFM) frameworks to ensure maximum clinical and social impact for every rupee allocated.

1. Allocative Efficiency: Prioritising Primary Healthcare

Directing fiscal resources toward grassroots care delivers disproportionately high returns across health indicators compared to expensive downstream interventions:

  • Higher Clinical Dividends: Investing in preventive and promotive care through networks like Ayushman Arogya Mandirs mitigates chronic disease burdens early. Despite high returns, preventive care currently accounts for less than 9% of Current Health Expenditure.
  • Decentralized Resource Allocation: The 15th Finance Commission earmarked ₹70,051 crore in tied health grants specifically for Urban and Rural Local Bodies, systematically redirecting fiscal flows to grassroots primary infrastructure.
  • Curtaiing Out-of-Pocket Expenditure (OOPE): While OOPE declined to 39.4% in 2021-22 before slightly increasing to 43.4% in FY23, sustaining this reduction necessitates accessible, free diagnostic and drug delivery at local primary clinics rather than relying solely on tertiary hospitalization insurance.

2. Executional Efficiency: Public Financial Management and Procurement

Even well-targeted budgets underperform without sound execution systems, transparent accounting, and efficient supply pipelines:

  • Real-Time Fund Tracking: Integrating National Health Mission allocations with the Public Financial Management System (PFMS) and the Single Nodal Account (SNA) framework prevents idle fund parking in state treasuries and enables real-time, need-based disbursements.
  • Preventing the 'March Rush': Systemic delays often culminate in hasty, uncoordinated spending in the final quarter of the financial year to exhaust lapsing funds. Granular pacing and multi-year budgetary credibility are essential to eliminate this practice.
  • Centralized IT-Driven Procurement: Establishing centralized pooled procurement and automated inventory systems—modeled after the Tamil Nadu Medical Services Corporation (TNMSC)—drastically curbs procurement corruption, minimizes stockouts, and lowers essential drug prices.

Conclusion

Progressing toward the National Health Policy target of allocating 2.5% of GDP to healthcare is essential, yet higher budgetary allocations must be matched by structural quality. Embedding digitized PFM oversight, curbing institutional inefficiencies, and empowering local primary health systems are fundamental to transforming financial outlays into tangible health outcomes.

Key facts to remember

statistic

The 15th Finance Commission earmarked ₹70,051 crore directly to local urban and rural bodies to strengthen grassroots health infrastructure.

— 15th Finance Commission Report
statistic

Out-of-pocket expenditure as a share of total health expenditure fell to 39.4% in 2021-22 before rebounding to 43.4% in FY23.

— National Health Accounts (NHA)
example
Tamil Nadu Medical Services Corporation (TNMSC)

A state-level centralized drug procurement model that uses digitized bidding and testing to provide uninterrupted supplies of low-cost generic drugs.

definition
March Rush

The rushed and often unproductive expenditure of budgetary allocations in the final month or quarter of a financial year merely to avoid fund lapsing.

Frequently asked questions

Why does spending on primary care offer better value than tertiary insurance?

Primary healthcare addresses disease burdens through low-cost screening, early diagnosis, and lifestyle interventions. This reduces the eventual incidence of expensive secondary and tertiary hospitalizations that drive impoverishing out-of-pocket costs.

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