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The CGD Podcast
Fiscal Transfers for Better Health – Podcast with Amanda Glassman and Anit Mukherjee
00:18:07
There have been major gains in development in many parts of the world, but hundreds of millions of people still suffer the dangerous consequences of poverty. How can we improve health systems to make them more effective, as well as less wasteful and...
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Foreign.
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Hello, I'm Rajesh Merchandani and thanks for joining me for this edition of the CGD podcast. Now, 2015 has been the year when we have been told there have been major gains in development in many parts of the world. But we've also been reminded, as if we could forget, that hundreds of millions of people still endure grinding poverty and the dangers of that it brings too many mothers dying in childbirth still, still too many of those children dying before the age of five from things like hunger, lack of sanitation or diseases that are easily treatable. And most of the world's poor don't live in the poorest countries. They live in China and India. Aid is not the only answer for them. Domestic spending is much more important to giving them better health. Now, in India, the central government has been experimenting with different ways to to allocate tax revenue to the States. Why is that important? Because in many developing countries, including India, it's not the central government, but state and local administrations that have much more responsibility for how much and how money is spent on improving people's health. So how well they do has lessons not only for India, but for other developing countries as well. So today we're looking at how to make smarter to targeted investments in health that actually achieve improvements for people that are less wasteful and are more publicly accountable. My CGD colleagues Anit Mukherjee and Amanda Glassman are co authors of a new report that we've just put out called Power to the States Making Fiscal Transfers Work for Better Health. And they both join me in the studio today. Guys, welcome. Very nice to see you.
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A
Thank you.
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C
Thank you.
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Amanda, let's start with you. So your starting point for the report, the very first words in it, in fact, are that most money and responsibility for health in many countries rests with sub national governments. How well has that been studied and understood?
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Well, that's at the core of fiscal policy. What people at the International Monetary Fund do, what the fiscal specialists do at the World bank, and they're concerned with how money is allocated to states, what's their pension burden. But the fiscal people have not been very engaged in the health sector and likewise the health people have not really engaged in fiscal policy. So one of the reasons we wanted to do this report is really to bring the fields together to look not just at how to allocate money fairly, but to allocate it in a way that would improve health.
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So in terms of not being aware of the importance of fiscal transfers, the fiscal system, how has that happened when as you say, so Much of the spending decisions are made at the sub national.
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Well, I mean, if you look at any kind of international agency like the World Health Organization, it's the national government that sits at the table. And similarly, donors have relationships with national level governments. They negotiate plans, family planning plans, maternal mortality reduction plans, women's empowerment plans. But it's actually not the national government that controls the budget anymore, it's the sub national government. And that's happening in places like Nigeria, Ethiopia, Kenya. And with so little accountability about the use of that money and how it's working to provide services or improve health, we're just not achieving as much as we could. And I mean donors, people are living this. National governments are obviously living this conundrum, but they seem to struggle how they can really generate better incentives for the state level officials to deliver on those promises that they've made to themselves and to the world.
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And from the perspective of the health workers on the ground, they're seeing all this money spent and the outcomes not being as what they could be.
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Exactly. I mean, one interesting thing, in Kenya, for example, they devolved responsibility for health to the counties and the hospitals went from national ownership to county ownership. And no one knows if that mattered for those hospitals and the services that they provide. No one was tracking the money, no one was tracking the production of services. No one knows whether people who were having chronic disease, health crises, that need hospital care, actually continued to get that care. They don't know the standard of quality. So that suggests to me that we really don't know what those health services were producing. Perhaps in the past it was okay to just rely on national surveys and see in general in terms of population health, what's happening. But given that there are so many other things that affect health, not just health services, it's really important for us to understand the connection between money, services provided and health outcomes. And that's really what this report is about.
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Anit Mukherjee so let's talk a little bit about the report. You looked at fiscal transfers, the centre passing on tax revenue to states. Now India sort of changed the way it does that in 2015. How has it changed it and how successful has it been?
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India has always had a fiscally federal structure, which means that the central government collects more taxes than the states and then it divides that money up and distributes it to the states on the basis of certain needs, which is most important is poverty, trying to address issues of underdevelopment. Now, the last year, which is this year, sorry, 2015, the amount of money which is Going to the states from the center's tax collection has increased by 10%. So previously, until now, 32% of all Central taxes were devolved to the states. Now it will be 42%, which is a big jump in terms of the changing share of the taxes which is distributed to the states. And this will go on the basis of a formula. And that formula also has been changed. Take into account higher population in most of the big states. Therefore, the poorer states, which are also the larger states with larger population, are going to get extra funds which are untied. That means they can use it as the pleats. So this is a huge structural change in the way India does its fiscal federalism in terms of its how it transfers money to the states.
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I mean, the center really has two choices, right? It can continue as. So at the center, there's less money now, more money. The states get to decide what they're going to use it for. And the question is, is the center going to continue to do input financing, meaning are they going to buy all the medical supplies? Are they going to say it's got to be a community health worker that provides this service and I pay for all those inputs at state level and that's how I'm going to see health gains? That seems unrealistic. You know, Anit is always reminding me the state of Rajasthan is like 20 Canada, okay? You cannot imagine prescribing a single intervention modality for such a large population and so many autonomous governments. So instead, what we're saying in this report is the other choice that a state governor or states could face or that the center could do is to incentivize states to achieve certain key health outcomes, not tell them how to do it. Which in any case, they're not going to be experts in the entire population of India, but instead to say we'll give some additional funding for those states that move most rapidly towards reduced infant mortality.
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For example, when we move to states which have high disease burdens with high populations, 200 million, 100 million, 80 million, these are like small countries. And therefore we forget that we should be having much more differentiated approach to how those states want to prioritize their expenditure and how they can use the money for better outcomes.
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So a state like Bihar, which is one of the poorest in India and has a population of 100 million, 100 million, so that's more than the United Kingdom, for example, almost a third of the US which is extraordinarily large, it still has a huge, huge number of people living in poverty with dreadful dire conditions in terms of their health. So what's gone before has not worked, is that what you're saying?
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Well, there's certainly been progress everywhere and a lot of that is down to rapid rates of economic growth and it has benefited the poor. There's also a lot of new programs that have actually transferred cash directly to poor families and that has also been important for well being. So we don't want to minimize all of the health gains that have happened. But overall there's been a doubling of public spending on health, but there has not been an across the board improvement in the use of certain kinds of key health services, nor in health status. So it's more an issue around getting the most for the money. Not that there hasn't been progress before, but the question is, should we be seeing a faster rate of improvement?
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What has happened is the federal government nearly double, tripled in fact its own expenditure on health and through this very large program called National Rural Health Mission. And one of the there have been two surveys, one at the beginning of the period and the latest data just came out which showed that a the number of home deliveries is now down to 20% in the rural areas from 65% in 2005. In the urban areas it's down to 10%. That means 90% of deliveries are happening in institutional settings.
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So women are going to hospitals.
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Women are going to hospitals, health centers, primary health centers or 24 hour community health centers to deliver babies. But if you look at the same data set and compare the two years the utilization of public health facilities have gone down both in inpatient and outpatient.
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So they're not, people are not using public health institutions for when they're sick or broken bones or whatever. They're not going there.
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They're favoring the private sector.
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Why is that?
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And there are several reasons. Number one is obviously the access. There have been several studies which showed that public health system in the delivery in India is very erratic. That means there is a set time when the health center is open and if one of the nurses don't come, the health center doesn't open. On the other hand, a state like Bihar, you mentioned before, in Bihar, both inpatient and outpatient utilization rates of public services have gone up and significantly so. But it started from a very, very low base. So when you expand public services in the public health sector system in health, obviously there is a demand that is created, but that demand plateaus out after a while when you want better and more quality service and therefore people, even poorer people, they seek care from the private providers.
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So because these states in India are so large, because they have such different levels of need and different needs, it would be more efficient to devolve more control of budgets to the state level. So they can decide X, Y and Z are our priorities, not what the centre is telling us.
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A
I mean, in practice in India and places like Kenya and Ethiopia, Nigeria, the money is mostly sub national, so it's mostly controlled by reflects the priorities of state governments. So the question I think that we tried to answer in the report is what is the role for the center given that situation where more and more of the funding is, the public money is happening at the state level. So with the little bit that the center has left, what can they do differently? What could they do better to leverage better performance at the state level? And I guess our suggestion is don't get lost in the weeds. Focus on the big issues really, you know, state clearly the things that they've committed to internationally or elsewhere. You know, whatever they think is most important. For example, Prime Minister Modi is interested in a free medicines program. So you know, if that's really the thing that he wants to leave India with at the end of his term, that some set of medicines was available everywhere because you know, let's say before Modi came to power there was a survey of essential medicines and only one of 10 was available in more than 20% of facilities. I mean, it's like, it's like a gross problem in the public sector.
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So if Prime Minister Modi is worried about his legacy and he wants his legacy to be, say, for example, the free medicines that you're talking about, that is something that is an area that the center should focus on, not the details of how states should deliver health services.
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Exactly, saying, okay, these 10 medications have to be available in every facility in our country to whomever needs them. You know, then you could be rewarding sort of service readiness in some share of the facilities at the state level. We have a preference because we're cgders for focusing on outcomes, you know, and just availability of medicines is not. That's probably an output. Put maybe it's an input depending on how you feel about these things.
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But better health is the outcome.
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Yeah, but you could do, you know, childhood immunization that they're doing a big push on. You know, you could do family planning consultations, you could do quality of care. You know, if during prenatal care you received the service, a woman who was pregnant received the services that were really going to make a difference for her child's well being or her own well being. So those are the kinds of things that we'd like to see them switch towards and really focus so that at the end of Modi's term, and for all future prime ministers too, those central commitments, those basic public health measures are actually carried out. They're not going to be able to pay for a full set of services at the state level. That's the state's job. So it's, can you get the main things done?
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So really we're sort of going through the main recommendations of the report here. Now, one of them is that the money from the centre is used to encourage states to spend on kind of national priorities and performance based on payments for national priorities. Then another recommendation is that the money to the states, which is now greater in India, should be used firstly for more health priorities, but should be smarter and targeted on outcomes and the specific needs in the localities where the money is going to. And then the third recommendation is one that we always come up with and you love Amanda, better data, evaluation, accountability. Talk to us a little bit about that.
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So, I mean, I'll just give you an example from a country that I worked in most of my previous career, which is Colombia. And Colombia is also a federal state. They have departments, sub national governments that spend most of the money. And they were concerned about falling immunization rates after a period of decentralization. So they developed a nice scheme. They followed all of our nice recommendations here and tied a portion, you know, held back a portion of the fiscal transfers and conditioned it on improvements in the under five children under five being fully immunized. The problem was that they were using an old census for the denominator, the 1992 census, and it was 2002. And obviously children have moved around a lot. They're not the same as they were. And this is an issue in India when for a long time the official source of data for denominators was like a 1972 census. You can imagine. So what happened was if you're going to have the number of kids actually vaccinated on top of what you think the universe of kids is, that's the denominator. You're actually going to be paying too much to people who shouldn't have gotten it or to states that shouldn't have gotten it, and less to those who should have. So getting the numbers right really matters and having some kind of independent verification of that also really matters.
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If India has to project itself as a power and in the milieu of countries of G20. We are in all the big groupings. And India is growing as the fastest growing economy in the world this year at 7.5%. Now we need a much broader and a much better vision of where our health system needs to be, because this is where this will determine India's productivity, India's capacity to innovate and capacity for a healthy workforce. And until now, we have been too far too much focused on the inputs and far less on how we can incentivize and learn from different states about what they do well, what they do better.
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And the importance of India getting it right is that India is home to hundreds of millions of people living in poverty. So if it gets it right, there are going to be major gains for health across the world as well as setting a model for other countries to follow.
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Exactly. I mean, India concentrates a fifth of the global disease burden, much of it preventable, as you've said. So imagine if they do get it right, not just in Bihar and Tamil Nadu and Kerala, but in the entire country. Could really be a game changer.
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Okay, guys, been really interesting to talk with you. Amanda Glassman, Anita Mukherjee, thanks very much for joining me.
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Thank you.
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Thank you very much.
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You can find this report on our website, cgdev.org the report's title again is Power to the Making Fiscal Transfers Work for Better Health. And please do join me, Rajesh Merchandani, for the next podcast from the center for Global Development.