Finance Commission holds meeting with the Ministry of Health and Family Welfare

MoHFW revises fund requirements to ₹ 6.04 lakh Cr

The 15^th Finance Commission today held a meeting with the Union Minister for Health and Family Welfare, Dr. Harsh Vardhan and senior officials of  Health Ministry on the specific issues of :  

• Revising the State Specific proposals of the Mnistry in light of the COVID-19 experience.
• Exploring  the  possibility  of back loading in the  light of fiscal strain   
• Consideration of the suggestions of the High Level Group of the XVFC on health by the Ministry.

Initiating the meeting the Chairman, XVFC, Shri N. K. Singh announced that looking at the peculiar state of the pandemic, the Commission has decided to have a separate Chapter on Health in its final Report to the Governmemt.  The Commission needed to know from the Ministry it views regarding the Central Government outlays, sector specific initiatives based on conditionalities and how the money set apart for the 3^rd tier could be assigned for health and health infrastructure.  The Minister for Health & Family Welfare, Dr. Harsh Vardhan described his vision for the improvement of India’s health sector and appreciated the Commission’s decision to reprioritize the sector.

The Ministry in a detailed presentation to the Commission highlighted the National Health Policy (NHP) 2017 targets which include:-

• Increase public health expenditure to 2.5% of GDP, in a progressive manner, by 2025.
• Primary Health Expenditure to be 2/3rd of the total health expenditure
• Increase State sector health spending   to more than 8% of their budget by 2020.

The Ministry pointed out that presently 35% of the public health expenditure is done by the Central Govt. and 65% by the State Governments.  The pandemic has established the importance of the need to strengthen the public health sector, surveillance and public health management, preventive and promotive health care with special focus on urban health.  The Ministry also felt that there was a need to increase the allocation of MoHFW on year to year basis.

The DoHFW has proposed for enhanced state specific grants in the following manner –

For untied funds:

• Minimum 10% of fund to be earmarked for the health sector with at-least 2/3rd being reserved for the primary health
• Gaps in funding for Primary Health Care in States to be used as a criteria - will help States that have significant funding needs and health lag, to get more funds & prioritize spending on health

For performance based incentives: 

• Composite Health Index to be utilized to encourage states to demonstrate performance on year on year basis –should have a weightage of 20% in the performance linked pool

The Ministry has submitted a revised proposal for fund requirement to the Finance Commission.  It has identified new areas on which support of the XVFC is required which include –

• New areas for support - Urban Health, Essential medicines, Starting DNB courses and Post-COVID health sector reforms
• Due consideration on recommendations of the High Level Group (HLG)
• Partial back-loading of funds
• Fund requirement revised from ₹ 4.99 lakh Cr to ₹ 6.04 lakh Cr for the period of the award of the XVFC ie 2021-22 to 2025-26.

The Ministry after giving due consideration to the recommendations of the High Level Group  of the XVFC on Health, and after partial back loading of the funds have prepared a revised requirement of ₹ 6.04 lakh crores from the earlier requirement of ₹ 4.99 lakh crores.  The Ministry has thus asked for additional resources to the tune  of 0.4  percent of  GDP per annum to the States which they felt would lead to significant progress towards achievement of the National Health Policy target.  The key elements of enhanced support identified by the Ministry were –

• Set up Medical Colleges(MCs) attached with District Hospitals(DHs)
• Training of 1.5Mn Skilled workforce in Allied Healthcare  
• Start Super Speciality Blocks (SSBs) under PMSSY  
• Health System Strengthening including Primary Healthcare.

The Commission noted all the points highlighted by the Minister and the Ministry and agreed that there was a need to increase public sector health outlay and also to develop a professional cadre of health workers.  There was also requirement for higher and continuing engagement of the States and the 3^rd tier for this purpose.  The Commission assured that it would not be found wanting in giving serious consideration to all the issues raised in today’s meeting.

Health sector financing: revised state-specific grants and performance-linked incentives proposed to bolster primary and urban health infrastructure. The Ministry requested that the Finance Commission include a dedicated Chapter on Health and revise XVFC-period funding to reflect COVID-19 lessons and National Health Policy targets. It proposed earmarking a minimum share of untied funds for health with two-thirds for primary care, using state funding gaps as allocation criteria, instituting performance-linked incentives based on a Composite Health Index, supporting urban health and medical education expansion, and adopting partial back-loading of disbursements.