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A Review of Health and Economics

and Economics Report of the National Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, Government of India, New Delhi, 2005.

A Review of Health and Economics

Report of the National Commission on Macroeconomics and Health,

Ministry of Health and Family Welfare, Government of India, New Delhi, 2005.


he World Health Organisation established the Commission on Macroeconomics and Health (CMH) in January 2000 to assess the place of health in global economic development. The CMH submitted its report in 2001 offering a new strategy for investing in health for economic development and recommended that each developing country establish a National Commission on Macroeconomics and Health (NCMH). The Indian government established the NCMH in March 2004, which submitted its report in August 2005. This article reviews the report of the NCMH (report henceforth).

Before getting into the substantive review of the report a point of clarification may be in order. The health system can be viewed from its narrow boundary, as activities under the direct control of the ministry of health to the broadest including personal and non-personal health interventions plus a limited set of inter-sectoral actions designed to improve health – to improve the level of population health and to reduce health inequalities in the population. Has the report addressed the broad spectrum of issues and come out with a strategic vision for the health sector in India?

I argue that there is little macroeconomics, or public health in the report (section 4). The lack of a macroeconomic perspective has come about owing to the way the terms of references are interpreted and the approach taken by the Commission (section 5), which in turn has something to do with the composition of the subcommission “the actual operational group for the exercise”. I do not believe that it is the lack of expertise in the country (section 6), which constrained the Commission. Before setting out a critic of the report its main contents are presented (section 3).

The Report: What It Contains

The report is in six sections including the introduction. The introduction traces India’s achievements in the last 50 years in terms of longevity, infant mortality rate (IMR), and containing diseases. It assesses India’s achievements as poor in comparison to Bangladesh and Sri Lanka, attributing it to low investment in health, absence of social insurance and impoverishment due to high hospitalisation costs. Within the country, there is a north-south divide – life expectancy at birth (LEB) in Kerala is 74 years compared to 56 years in Madhya Pradesh (how did it become 58 for MP by the time we reach page 125 is a wonder!). Further, India faces a dual challenge of a high prevalence of pretransitional diseases together with a growing increase of HIV/AIDS and noncommunicable diseases, such as diabetes, vascular diseases, etc. The report seeks to provide some options for future action, “so that the universal aspiration of all Indians to have access to an equitable, efficient and quality health system is realised by 2025” (p 17).

Section I discusses the impact of investment in health on GDP and the effect of GDP growth on health gains and argues that ill health is a big burden on households and individuals. The inter-and intra-state disparities in health status in India and among categories of economically and socially deprived groups is mentioned. The challenges ahead are highlighted under four heads: malnutrition, lack of human resources for steering the health system, ageing population and the emerging disease burden. Following a cursory discussion of the first three, the discussion of the disease burden provides some estimates and projections of priority health conditions and their economic impact. The report then goes on to present cost effective interventions for preventing diseases that will yield the maximum possible gains in population health outcomes based on causal analysis for 17 diseases.

Section II is an analysis of India’s health system, the financing and delivery of

Economic and Political Weekly March 18, 2006 healthcare services. The commission’s assessment runs on the following lines: “Despite States attempting several innovations, the health system continues to be unaccountable, disconnected to public health goals, inadequately equipped to address people’s expectations and fails to provide financial risk protection to those unable to access care for want of ability to pay” (p 43). The reasons for such failure are traced to three broad factors: “poor governance and dysfunctional role of the state; unrealistic goal setting and lack of a strategic vision; and weak management” (p 44). Then, there are sections on devolution of authority to local bodies, the role of the private sector in healthcare delivery, the lack of human resources for health, poor training or lack of continuous training of staff, poor quality of training in medical colleges, poor incentive systems, access to essential drugs and medicines, etc.

The last part of the section deals with financing public health in India. The well known facts that health spending in India accounts for 4.8 per cent GDP, the government spending is only 0.9 per cent of GDP, that household spending varies widely across the states, and that public spending has been decelerating, are reiterated. It is indicated that salaries account for the bulk of public spending by state governments. There is a section on user charges as an option, which comes out with some findings of a new study. The user fee in Andhra Pradesh substituted budgetary support and did not become an independent supplementary source of additional revenue. The utilisation of funds from user charges was low, and “the number of poor accessing public health facilities fell, particularly for inpatient services” (Report, p 73).

Section III talks of building a health system in India in terms of two initiatives to improve efficiency and accountability in the health system: shift the role of the state from being a provider to a purchaser of healthcare, and embedding the three tiers of primary care within the community. As regards the purchaser of care, the benefit package is conceived in three parts: a core package – disease control, immunisation, information on nutrition, water and sanitation; a basic package, addition to the above, surgery and treatment for hypertension, diabetes, respiratory diseases such as asthma and injury; and a secondary package, treatment of vascular diseases, cancer and mental illness. It is envisaged that the core package will be mandatory for all health facilities, public or private, as a condition for getting any recognition. The basic package would form the basis for funding the community health centres, primary health centres and subcentres. The sub-district and district level hospitals will be upgraded to provide the secondary care services.

As regards funding healthcare, two options are discussed: “(i) targeting the poor only for publicly funded care; and/ or (ii) considering alternate models of health financing that facilitate cost sharing by households” (p 87). The Commission does not recommend user fees and targeting the poor. As regards option (ii), four models are discussed and model 4: health insurance, private and social health insurance, is recommended as the most feasible for India. On strengthening public health infrastructure, what is suggested is a restructuring and strengthening of the existing primary healthcare system to make it more functional, efficient and accountable. In addition to substantial investments to make it conform with norms and standards, the involvement of the community and locally elected bodies would be critical to make the system accountable.

The section then goes on to suggest ways of reducing the disease burden through strong public action to reduce malnutrition, better programme implementation to control diseases, and behavioural change by higher funding for information, education and communication. It follows it up with a discussion of regulation and institutional infrastructure for coping with health markets, and ends up emphasising the need to increase the number of medical colleges, nursing colleges,andschools of public health is mentioned.

Section IV argues that “achieving MDG goals and the Tenth Plan objectives in India will be possible only if there is a significant increase in resources, targeting areas and population groups with low health indicators and focusing on the upgradation of the health system through a well sequenced process of reform” (p 113). The resources required for the provisioning of public goods and primary and secondary services will be of the order of Rs 74,000 crore that is about 2.2 per cent of GDP. It is shown that three states – Bihar, Uttar Pradesh and Madhya Pradesh – would require the bulk of the amounts (50 per cent) and central transfer is the only way to meet such vast resources.

Section V contain the conclusions and recommendations. The main report comes with two volumes of background papers titled, ‘Financing and Delivery of Health Care Services in India’ and ‘Burden of Disease in India’ (BDI).

Whither the Macroeconomics?

This review looks at the broad approach and overall problems of the report. In particular, four questions are discussed:

  • (i) Is there a macroeconomic perspective?
  • (ii) What is the public health concern?
  • (iii) Does the Commission look into ruralurban differences? (iv) Has the magnitude of the regional variation been taken into account?

    I have been trying to find some macroeconomics in the report of the commission on macroeconomics. The only place some macroeconomic concerns appear is in the discussion of resource mobilisation by states. Otherwise what we see is the following statement:

    ...we feel such policies (referring to the EGS) should be complemented with other measures that are aimed at protecting labour intensive sectors through various set of instruments such as for example, higher taxes on labour displacing technologies; incentives for employment intensive sectors such as weaving; mandating minimum wages by linking them with the Consumer Price Index, etc (Report, pp 113-14).

    This has left me wondering what economics has gone into their thinking.

    Does it not make sense to discuss issues such as the following in the current phase of growth of the Indian economy: (i) the nature of employment growth currently

    Table: Distribution of Indian States by NNMR and PNMR, 1998-99

    NNMR <5 5-15 PNMR 15-25 >25
    <15 20-30 Kerala Himachal Pradesh Delhi
    30-40 >40 Goa, Maharashtra, Karnataka, Tamil Nadu West Bengal Jammu and Kashmir Andhra Pradesh Bihar, Assam, Rajasthan, Madhya Pradesh, Uttar Pradesh, Orissa

    Economic and Political Weekly March 18, 2006

    taking place in the economy, namely growth led by the private corporate sector;

    (ii) mobility of populations within the country as well from India to other countries and back? Do these impact the health sector? If so, in what way? What should be the policy initiative?

    Just to cite an example, when a large number of unskilled labourers from Japanese encephalitis (JE) and Malaria endemic West Bengal and Orissa move to Kerala, how should the Kerala health system respond to it? What would be the organisational structure and technical capacity required?

    It is well known that public health services are distinct from medical care services. They involve, “such disparate activities as improving slaughterhouse hygiene and cattle keeping practices, cleaning irrigation canals to discourage vector breeding, and applying public health regulations” [Dasgupta:5159] aimed at reducing a population’s exposure to disease. One of the main criticisms of the Indian public policies and programmes is that they have focused largely on the provision of curative care and personal prophylactic interventions such as immunisation, neglecting public health activities. The whole of BDI trudges the same conventional path identifying cost effective interventions. Just one example will bring out the starkness of the problem. While discussing the causes of Japanese encephalitis, the commission identifies poor intersectoral coordination with agriculture, animal husbandry and local government as a health system cause (BDI:358). But the JE control strategy has nothing to say on this issue.

    The report has completely ignored the emerging urban problem. The NSS 52nd round data reported the perceived morbidity to be higher in urban areas in a number of states.1 The number of persons reporting an ailment during the last 15 days (per 1,000 persons) was higher or equal in the urban areas compared to the rural areas in Assam, Bihar, Punjab, Rajasthan, Tamil Nadu, Haryana, Orissa and West Bengal. Interestingly, such differences are not on account of the higher burden of chronic diseases in the urban areas. The burden of acute diseases in the younger age groups (0-14 years) is what makes for the difference. If it is largely perception, then how is it that in Kerala (with its higher literacy and better access to healthcare facilities) among the 0-14 years age group, the number reporting ailments is significantly lower in the urban areas compared to the rural areas?

    Any way, there is a problem of urban health, which does not look to be small, and the commission has ignored that reality completely.

    India is a country of continental proportions with one-sixth the world population and vast differences in health status, disease burden and size and composition of the healthcare sector. But a discussion of the regional variation and the health inequalities is incidental and not integral to the report. The data collated and presented in the background volume, Burden of Disease in India, on IMR, neonatal mortality rates (NNMR), etc, suggest something significant on the regional dimension of our health problems. But the causal analysis in the report reduces factors shaping outcomes to individual and programme implementation factors. I provide just one or two examples of what is missed out in the process.

    It is evident from the table that the Indian states fall into two or three clusters as regards the level of NNMR and postneonatal mortality rate (PNMR). At one end is the cluster consisting of Rajasthan, Uttar Pradesh, Madhya Pradesh, Bihar, and Assam with extremely high mortality of the just born; at the other end sits Kerala, the achievements of which in the 1970s has not been surpassed by the former cluster even today. The interesting story does not begin with these two clusters, but with the middle group. West Bengal reported NNMR of 31.9 in 1998-99, next only to Kerala, Himachal Pradesh, Goa and comparable to Maharashtra, but the per cent of mothers who received antenatal care (ANC) is 19.7 in West Bengal, just above the level in Assam and 10 percentage points lower than that in Maharashtra. Institutional delivery in West Bengal is 40 per cent, 13 percentage points lower than that in Maharashtra and 50 percentage points lower than that in Goa. Similar are the differentials for the percentage assisted deliveries and vaccination. How is it that West Bengal could achieve mortality reduction at relatively lower levels of coverage of institutional delivery, ANC, etc? Is it not useful to find out the social processes that resulted in such outcomes?

    Another puzzling comparison is that between Goa and Tamil Nadu on the one side and Kerala on the other. All the three states report extremely high levels of institutional deliveries, ANC, assisted deliveries, and immunisation coverage. But NNMR is 13.3 in Kerala compared to over

    31.2 in Goa and 34.8 in Tamil Nadu; PNMR is 2.5 in Kerala, 5.5 in Goa and 13.3 in

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    Economic and Political Weekly March 18, 2006 Tamil Nadu. Is not there something to learn from here? When the picture is so complex all that the “causal analysis” of the NCMH has to suggest is the following:

    Apart from these medical and nutritional interventions, there are other non-health interventions that also need to be considered in policy design, such as reducing discriminatory practices towards the girl child, enhanced schooling of females, better roads, access to clean drinking water, electricity and other infrastructure, as these are known to have a beneficial impact on the IMR, widening access to timely care, etc (BDI, p 5).

    Does not a commission entrusted with the task of taking a health system view have a responsibility to come out with something beyond an all-inclusive list?

    Thus, macroeconomic concerns, urban health, public health, and regional variation have all been ignored by NCMH. Why? The answer, probably, lies in the approach taken by the commission, which I turn to in the next section.

    Commission’s Approach

    How has the Commission approached its task? It is not spelt out in the main report. But we do get an inkling of the approach in the preface to the BDI: “The Terms of Reference of the NCMH were mainly centred on identifying a package of essential health interventions that ought to be made available to all citizens and also list systemic constraints that need to be addressed for ensuring universal access to this package of services”. This reduced the main concerns of the Commission, to arrive at the prevalence of diseases in India, to project the disease burden in a decade from now, to identify the proximate, direct and indirect casual factors and to provide a minimal standard treatment protocol listing the interventions that would avert death and reduce progression of disease.

    The method adopted is one of exhaustive literature review to provide baseline of disease prevalence and causal analysis indicating the various direct and indirect factors that contributed to the persistence of the diseases. However, the Commission was “unable to find any studies or research which provided evidence demonstrating the efficacy of specific interventions under a programme in Indian conditions and among different population groups” (Preface to BDI) inhibiting it from being able to identify those sets of interventions that ought to be accorded high priority to achieving an end goal. This makes me suspicious of the way the reviews were carried out by the NCMH. For instance, already in the mid-1970s and 1980s, we had a few peer reviewed articles explaining the routes to low mortality in Kerala [Caldwell 1986; Krishnan 1976]. Not only that, there is no mention of these studies but the Commission thinks that nothing has been produced since then.

    No Social Sector Economist in India?

    The gazette notification constituting the Commission states the composition of the sub-commission: 1-2 economists having significant contributions to social sectors and 1-2 public health experts. Surprisingly, except for one full time member – other than the chairman and the member secretary – no social sector economist or public health expert was called to the subcommission. One wonders, why? The report mentions in numerous places that there is an acute shortage of epidemiologists, biostatisticians and personnel trained in public health: “For a billion population, India has just a couple of health economists, biostatisticians, epidemiologists or public health managers having the requisite understanding of monitoring the liberalised environment, say, for clinical trials or insurance” (Report, p 27). “The design features of the insurance programme needs to be carefully thought, particularly in the absence of any expertise, research or experience on provider and consumer behaviour in such circumstances in India to guide us. It would be useful to have on a long-term basis (not as shortterm consultants) experts from the more mature market economies to assist us in the process” (Report, p 130) (italics added).

    Are we so deficient in social scientists working on social sector issues in this country? It could not be true that in a country, where an innocuous volume on the development experience of a state brought out 30 years ago [United Nations 1975] could spur a new approach to human development and spawn academic work on social sector issues in a new direction, there are no economists worth the name. Probably, the Commission thinks otherwise and the result is there for everybody to see.




    [I acknowledge comments from K J Joseph, Praveena Kodoth and U S Mishra.]

    1 We are aware of the limitations of relying on the internal view of health [Sen 2002].


    Caldwell, John C (1986): ‘Routes to Low Mortality in Poor Countries’, Population andDevelopment Review 12, No 2, June.

    Dasgupta, Monica (2005): ‘Public Health in India: Dangerous Neglect’, Economic and Political Weekly, December 3.

    Krishnan, T N (1976): ‘Demographic Transition in Kerala: Facts and Factors’, Economic and Political Weekly, Special Number, August.

    WHO Commission on Macroeconomics and Health (2001): ‘Macroeconomics and Health: Investing in Health for Economic Development’,

    Report of the Commission on Macroeconomicsand Health, World Health Organisation, Geneva.

    National Commission on Macroeconomics and Health (2005): Report of the NationalCommission on Macroeconomics and Health, Ministry of Health and Family Welfare, Government of India, New Delhi, August.

    Sen, A (2002): ‘Health: Perception versusObservation’,British Medical Journal, Volume 324, April 13.

    United Nations (1975): Poverty, Unemploymentand Development Policy: A Case Study ofSelected Issues with Reference to Kerala, ST/ ESA/29, Department of Economic and SocialAffairs, United Nations.



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