2017

Tracking financial resources for primary health care in BIHAR, India

Peter Berman, Manjiri Bhawalkar, Rajesh Jha A report of the Resource Tracking and Management Project Harvard T.H. Chan School of Public Health Boston, MA, USA June 2017 Tracking financial resources for primary health care in BIHAR, India

Table of Contents

Acknowledgement...... III Abbreviations...... IV List of figures...... VI List of tables...... VII 1. Introduction...... 1 Concept and purpose...... 1 Scope...... 1 Resource tracking and management framework...... 1 Key research questions...... 2 Organization of the report...... 3 2. Health Sector in Bihar...... 4 Demographic overview...... 4 Healthcare delivery network...... 4 Human resources in health...... 4 Health sector outputs and performance in Bihar...... 5 3. Methodology...... 7 Overview of the approach...... 7 Limitations...... 8 4. Budgeting and fund flow processes...... 11 5.Results...... 14 Resource mobilization – trends and analysis...... 14 Resource allocation – trends and analysis...... 17 Health expenditure analysis...... 18 Overall trends...... 18 Expenditure by levels of care with focus on primary care...... 21 Expenditure by types of inputs...... 23 Budget execution and budget utilization analysis...... 25 6. Conclusion...... 33 7. Policy implication and recommendations...... 34 Annex 1: Data sources...... 36 Annex 2: District expenditure analysis...... 37 Bibliography...... 40 Tracking financial resources for primary health care in BIHAR, India

Acknowledgement

This study would not have been possible without the support of the state of Bihar, Bihar State Health Society, and the Bill and Melinda Gates Foundation. This study is financed by the Gates Foundation learning grant – Resource Tracking and Management/India. The authors acknowledge the Senior Program Officer, Dr. Hong Wang, for his unrelenting support and technical input. The authors are also grateful for the support from experts at the Foundation’s India Country Office, including, Sandhya Rao, Dr. Rajeev Ahuja, and Dr. Jack Langenbrunner; Ms Usha Kiran,and Mr. Debarshi Bhattacharya for their India relevant policy advise. This study would not have been possible for incredible effort by Finance Consultant Mr KC Saha. His expertise and vast network of professional connections made much of the data collection possible. The authors are indebted to several state treasury officers who took the time and made available their staff during the data collection effort. Of particular note in the Department of Finance are Secretary - Resource and Expenditure Mr Venkatesh Prasad; Joint Secretary -Treasury Mr Kameshwar Ojha; Under Secretary – Budget, Mr Ajay Kumar Thakur, and their teams. The authors are grateful to the support from Chief Treasury Officers Rakesh Kumar Choudhari, Mohammad Sahik, and Mr Vijay Kumar Azad. Much gratitude is owed to the State Health Society Bihar and its officers and accountants, particularly the Additional Director – Finance, Mr. Khalid Arshad. The team would also like to acknowledge the support from Population Foundation of India for state level data.

III Acknowledgement Tracking financial resources for primary health care in BIHAR, India

Abbreviations

AHS Annual Health Survey ANM Auxiliary Nurse Midwife APHC Additional Primary Health Center ASHA Accredited Social Health Activist BE Budget Estimate CAG Comptroller and Auditor General CHC Community Health Center DDO Drawing and Disbursing Officer DHS District Health Society DoMH&FW Department of Medical, Health & Family Welfare DPMU District Program Management Unit EDL Essential Drug List FC Finance Commission FGD Focus Group Discussion FMR Financial Management Report (of NHM) FW Family Welfare GDP Gross Domestic Product GoI Government of India GPCE Government Primary Care Expenditure GSDP Gross State Domestic Product HMIS Health Management Information System HR Human Resources HSPH Harvard T.H. Chan School of Public Health IDI In-depth Interview IMR Infant Mortality Rate JSY Janani Suraksha Yojana (Mother/Maternal Safety Program) MFP Mission Flexi Pool (of NHM) NDCP National Disease Control Program NGO Non-Government Organization NHM National Health Mission NHSRC National Health Systems Resource Center NRHM National Rural Health Mission

IV Abbreviations Tracking financial resources for primary health care in BIHAR, India

PHC Primary Health Center RBI Reserve Bank of India RCH Reproductive and Child Health RE Revised Estimate RKS Rogi Kalyan Samiti (Patient Welfare Committee) RoP Record of Proceedings Rs. Rupees SHB State Health Budget SHC Sub Health Center SHE State Health Expenditure SHSB State Health Society Bihar SPMU State Program Management Unit TGHB Total Government Health Budget TGHE Total Government Health Expenditure TOR Terms of Reference TRB Treasury Route Budget UC Utilization Certificate USD United States Dollars VHND Village Health and Nutrition Day VHSNC Village Health, Sanitation and Nutrition Committee

V Abbreviations Tracking financial resources for primary health care in BIHAR, India

List of figures

Figure 1: Resource tracking and management framework...... 2

Figure 2: Channels of Treasury and Society budgets for health...... 12

Figure 3: State’s own revenues and central support...... 14

Figure 4: Composition of central funds to Bihar...... 15

Figure 5: Allocation of funds between sectors over time...... 15

Figure 6: Bihar health budgets over time...... 16

Figure 7: Budget allocations by levels of care...... 17

Figure 8: Resource allocation ratios...... 18

Figure 9: TGHE with NHM share...... 20

Figure 10: Relative growth rate of health expenditure in Bihar...... 20

Figure 11: Per capita expenditure on health...... 21

Figure 12: Per capita expenditure on primary care...... 22

Figure 13: Health expenditure (treasury route) trend by functions...... 22

Figure 14: Expenditure by types of inputs: 2012-13 & 2013-14...... 23

Figure 15: Utilization of health budgets in Bihar: 2007-08 to 2013-14...... 26

Figure 16: Utilization rates by cost inputs & levels of care...... 27

Figure 17: NHM utilization by components...... 29

Figure 18: Utilization of Mission Flexi Pool budget lines under NHM...... 29

Figure 19: NHM MFP line item budget shares and utilization rates...... 30

Figure 2A: Real growth in TGHE in Bihar study districts between 2009-10 & 2014-15...... 38

Figure 2B: Impact of NHM on primary care expenditure levels in Bihar study districts...... 39

VI List of Figures Tracking financial resources for primary health care in BIHAR, India

List of tables

Table 1: Performance against select health indicators in EAG States: a comparative overview..5

Table 2: Bihar health sector performance against key impact indicators...... 6

Table 3: Coding of budget heads using the NHSRC Budget Tracking Toolkit...... 7

Table 4: Sample units & tools for the qualitative component...... 8

Table 5: Type of health facilities as per population norms under the Indian Public

Health Standards...... 9

Table 6: Sources and managers of funds in Bihar health system...... 12

Table 7: Total health budget by source...... 16

Table 8: Total government health budget and expenditure in Bihar...... 19

Table 9: Health expenditure trends in Bihar...... 19

Table 10: Primary care expenditure through different routes...... 21

Table 11: Expenditure on drugs & pharmaceuticals...... 24

Table 12: Utilization rates under NHM in Bihar...... 26

Table 2A: TGHE in study districts in Bihar...... 37

Table 2B: NHM as a share of TGHE in study districts in Bihar...... 37

Table 2C: Year-on-year growth rate in TGHE (adjusted at 2004-05 prices)...... 37

Table 2D: Primary care as a share of TGHE in study districts in Bihar...... 38

VII List of Tables Tracking financial resources for primary health care in BIHAR, India

1. Introduction

The performance of a country’s health system is determined by a number of factors, including those related to system financing. Improvement in health of the population, financial risk protection and citizen satisfaction are three main goals often used to assess health system performance (Roberts et al., 2003). Developing strategies to meet those goals, enabling mid-course correction, and measuring health system performance rely on availability of sound data. To play an effective stewardship role in providing healthcare to its citizens, government needs evidence of how well health resources are managed (Powell-Jackson et al., 2007). Health resource tracking can be an integral part of governments’ efforts to strengthen the health system.

The post-2015 development (Sustainable Development Goals) agenda includes a renewed focus on Universal Health Coverage (UHC) and more emphasis clearly on system-strengthening approach. Primary care, including preventive services and maternal and child health, forms the backbone of a cost-effective health system. Health resource tracking can be applied to government financing of primary health care as one contribution to strengthening health systems.

Concept and purpose

The Resource Tracking and Management (RTM) Project at Harvard T.H. Chan School of Public Health (HSPH) helps improve understanding of the financing of primary health care in Ethiopia and India and its effects on health system performance. This project was funded by a grant from the Bill and Melinda Gates Foundation. The grant includes the opportunity for learning from India, with a specific focus on Uttar Pradesh and Bihar. Following an initial rapid assessment (Berman et al, 2013) and consultation with India’s Ministry of Health and Family Welfare and the Gates Foundation’s India Office it was decided that grant activities would focus on the following questions: what is the total resource envelope for primary care (including state and central contributions); whether allocation of public resources for primary care activities is well aligned with resources needed; whether there is adequate utilization of the allocated funds; whether primary care spending is purchasing the right mix of inputs to assure delivery of maximum outputs; and eventually better targeting of primary care resources to benefit the poor.

Scope

The scope of this report is limited to public sector financing in the state of Bihar only, and does not include private sector or household expenditures on health. Two other reports, one on Uttar Pradesh and the other at the national level, have also been prepared under the RTM project.

Financial scope

We analyzed budget allocation and expenditure data for seven years (from financial year 2007-08 to 2013-14). The scope includes government financing through the budget / treasury route (funds pooled by the state from general taxation) and through other sources of central government support for health routed through the Department of Health and Family Welfare and the State Health Society, Bihar.

Geographical scope

Analysis at the state level is based on the consolidated financial and output data for the entire state of Bihar. In addition, six districts Bhagalpur, Darbhanga, East Champaran, Kishanganj, Patna and Sheohar were identified for a deeper dive to better understand expenditure trends and use of government funds.

Resource tracking and management framework

The study used the Resource Tracking and Management (RTM) project framework presented in Figure 1 below.

1 Introduction Tracking financial resources for primary health care in BIHAR, India

Figure 1: Resource tracking and management framework

Resource Resource Resource Resource Resource Mobilization Allocation Utilization Productivity Targeting

What are the How are funds Are the allocated How effectively Are inputs benefiting determinants of total allocated to different funds being are resources the intended resource envelope for programs and utilized? What being translated individuals and health at national and functions at national factors drive into services? population? Is public sub-national levels? and sub-national successful budget What are the spending reaching the levels? What factors execution? What effects on volume poor? determine the are the existing and quality? allocation to primary bottlenecks? care?

Key research questions

Based on the above framework, the study looked at compositional changes in allocation and expenditure patterns across different levels of care with special focus on primary care and across cost inputs (human resource, operational costs, drugs and pharmaceuticals and capital projects).

The study addressed the following questions:

a. What are the total government health budgets and expenditures in Bihar and how are they distributed across cost categories, and across time?

b. What is the priority accorded to the health sector vis-à-vis other social sectors as per budget allocations by the state government?

c. What are the sources of financing for government spending and what are their shares?

d. What is the trend of actual expenditure versus budget/allocation across time?

e. What is the total government health expenditure as a percentage of the total government expenditure? What is the trend across time? How does it vary for Society and Treasury routes?

f. What is the total government expenditure on primary care as a share of the total government expenditure on health?

g. What is the per capita state government health expenditure over time?

h. How much is being spent on drugs and pharmaceuticals over time?

i. To what extent do budget allocations result in actual expenditures? Are there any differences in budget utilization between Treasury and Society routes? What are the factors that facilitate or inhibit utilization of funds?

2 Introduction Tracking financial resources for primary health care in BIHAR, India

Organization of the Report

The next section summarizes the performance of the health sector in Bihar, followed by the methodological approach we employed to understand the resource flows in Bihar. The complex budgeting process is laid out in section 4, followed by a detailed discussion of the results using the RTM framework. We end with the conclusion and some policy implications of the findings.

3 Introduction Tracking financial resources for primary health care in BIHAR, India

2. Health Sector in Bihar

The Bihar health sector has had only limited success in delivering equitable, accessible and quality health care services to its citizens, as evidenced by the state’s weak health outcomes in comparison to other Indian states. The fiscal and political challenges in Bihar further exacerbate the inadequacy of the health care delivery system in delivering the necessary services. The system is impaired by unequal access to health care, high inequity, poor quality health care services, insufficient institutional capacity and human resources, and deficient public health spending associated with high out-of-pocket expenditures (GoB, 2012; GoI, 2007; NHM, 2013). The ratio of private spending on health care relative to public spending is second highest in India, and considering that one-third of Bihar’s population is below the poverty line, the burden of out of pocket payments is catastrophic on those already below the poverty line and those on the brink of it (WorldBank, 2005; UNICEF). As an Empowered Action Group (EAG)1 state, Bihar qualifies for additional central subsidies to strengthen its weak health outcomes and infrastructure. Unfortunately, the increased funding has not yet changed the picture of Bihar, one of the lowest performing states among its EAG peers.

Demographic overview

Bihar has a population of 103.8 million (Census, 2011), which makes it the third most populous state in India, constituting approximately 8.6 percent of the country’s total population. However, compared to the two largest states, Uttar Pradesh and Maharashtra, Bihar is much more densely populated at 1,102/km2 as compared to 829/ km2 and 365/km2, respectively. Almost 90 percent of the population resides in rural areas with limited employment opportunities and little access to basic services. The population in Bihar is also expected to grow faster than the national average as it has the highest fertility rate in the country at 3.5 compared to the national average of 2.3.

Healthcare delivery network

Bihar’s overall public health infrastructure network, comprises about 9,700 Sub Health Centers (SHC), 1,800 Primary Health Centers (PHC) and 70 Community Health Centers (CHC). Despite these numbers, Bihar only has 50 percent of the SHCs, 60 percent of the PHCs, and a mere 9 percent of the CHCs it needs based on the national government’s supply to population norms (GoI, 2015). This significant deficit in basic health infrastructure in comparison with other states is one key contextual factor in Bihar.

Human resources in health

Similar to its deficit in physical infrastructure, Bihar has a significant gap in human resources for health compared to national norms. According to “Rural Health Statistics 2015” (GoI, 2015), the greatest shortfalls exist among physicians and specialists across the state at 75 percent or more while deficits of male health workers at SHCs and pharmacists at PHCs and CHCs exceed 89 percent. Further, female and male health assistants are in short supply at 80 and 97 percent respectively. Fortunately, Bihar benefits from a considerable surplus of female health workers compared to male health workers. Human resources for health remain probably the largest supply side barrier to gaining sufficient access to equitable and quality health care.

1 Eight socioeconomically backward states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttaranchal and Uttar Pradesh, referred to as the Empowered Action Group (EAG) states, lag behind in the demographic transition and have the highest infant mortality rates in the country.

4 Health Sector in Bihar Tracking financial resources for primary health care in BIHAR, India

Health sector outputs and performance in Bihar

The most recent Annual Health Survey highlights that Bihar has the lowest usage of any method of family planning (41.2 percent) amongst Indian states. Full antenatal checkup, though not the lowest, is only 7.8 percent in Bihar as compared to 27.8 percent in Odisha. Institutional delivery in Bihar is 55.4 percent compared to a high of 82.6 percent in Madhya Pradesh. Only 40.9 percent of the pregnant women in Bihar received financial benefits under the Janani Suraksha Yojana (JSY), the flagship scheme of the Government of India in contrast to 72.9 percent in Madhya Pradesh. The percentage of newborns checked within 24 hours of birth (61.9 percent) and the percentage of children breastfed within 1 hour of birth (37 percent) is the lowest observed among all EAG states. Between 2010- 11 and 2015-16, institutional deliveries declined by 9 percent and male sterilizations by 74 percent. Bihar has an average IMR (49) and NNMR (32) but the highest MMR (274) among the EAG states. See Table 1.

Table 1: Performance of select health indicators in EAG States: a comparative overview

Madhya No. Indicators Bihar Chhatisgarh Jharkhand Odisha Rajasthan UP Uttarakhand Pradesh HEALTH INDICATORS 1 Total Fertility Rate 3.5 2.7 2.7 3 2.2 2.9 3.3 2.1 Current usage of any method of 2 41.2 60.7 57.5 63.2 62.4 70.2 59 62.7 family planning Share of sterilization in any modern method of family 3 Female 84.1% 86.5% 76.7% 82% 70.8% 76% 48.9% 50.8% Male 0.8% 1.9% 1.1% 2% 0.6% 1% 0.8% 2.4% Women receiving full antenatal 4 7.8% 22.5% 13.6% 16.2% 27.8% 9.5% 6.8% 17.1% check-up 5 Institutional delivery 55.4% 39.5% 46.2% 82.6% 80.8% 78% 56.7% 58.3% Mothers who availed financial 6 40.9% 34% 23.9% 72.9% 70.3% 59.5% 36.4% 33.8% assistance under JSY 7 Pregnancy resulting in abortion 4.5% 1.4% 5.4% 3.2% 6.7% 3.3% 7.1% 6.5% Mothers not receiving any post 8 19.4% 22% 26.1% 14.1% 12.1% 16.8% 17.9% 30.1% natal care Percentage of new born checked 9 61.9% 65.9% 64.8% 79.1% 81.7% 76.3% 77.7% 62.9% within 24 hours of birth Fully immunized children (12-23 10 69.9% 74.9% 69.9% 66.4% 68.8% 74.2% 52.7% 79.6% months) Children (6-35 months) given 11 56.2% 68.3% 58.6% 58.1% 68.6% 74.2% 40.8% 57.1% Vitamin A dose Percentage of children breastfed 12 37% 66.3% 43.3% 66.8% 78.7% 54.1% 39.4% 65.1% within 1 hour of birth 13 Crude Birth Rate 26.1 23.2 23 24.5 19.6 24.1 24.8 18 14 Crude Death Rate 6.8 7.3 5.7 7.7 8.1 6.4 8.3 6.4 15 Under-5 Mortality Rate 70 60 51 83 75 74 90 48 16 Maternal Mortality Ratio 274 244 245 227 230 208 258 165 17 Infant Mortality Rate 49 46 36 62 56 55 68 40 18 Neo-natal Mortality Rate 32 32 23 42 37 37 49 28 ECONOMIC INDICATORS Gross State Domestic Product 2,936,159 1,656,412 1,516,547 3,612,703 2,512,205 4,701,784 7,803,986 1,082,498 19 (GSDP) in million Rs 20 GSDP per capita 29,652 67,374 47,534 49,256 61,116 68,248 38,208 107,348

5 Health Sector in Bihar Tracking financial resources for primary health care in BIHAR, India

Despite its poor performance relative to other EAG states, Bihar’s health indicators are in fact gradually improving over time. From 2010-11 to 2015-16, the percentage of women who received 3 ANC check-ups to total ANC registrations has increased by 35 percent. In the same time period there is a 34 percent rise in the percentage of women receiving post-partum check-up within 48 hours of delivery and a 64 percent reduction in the percentage of newborns weighing less than 2.5 kilograms to the total newborns weighed at birth2. Improvements in Bihar’s key impact indicators are illustrated in Table 2.

Table 2: Bihar health sector performance against key impact indicators

No. Impact Indicators 2010-11 2011-12 2012-13 1 Crude Birth Rate 26.7 26.3 26.1 2 Crude Death Rate 7.2 7.0 6.8 3 Infant Mortality Rate 55 52 48 4 Neo-natal Mortality Rate 35 34 32 5 Under-5 Mortality Rate 77 73 70 6 Maternal Mortality Ratio 305 294 274

Source: Annual Health Survey Bulletin, 2010-11, 2011-12, 2012-13, Registrar General of India

2Based on analysis of HMIS Standard Reports for Bihar from 2010-11 to 2015-16, https://nrhm-mis.nic.in/hmisre- ports/frmstandard_reports.aspx accessed on 20 June 2016.

6 Health Sector in Bihar Tracking financial resources for primary health care in BIHAR, India

3. Methodology

Overview of the approach

The study was primarily based on secondary data (budget, allocations and expenditure, outputs) in addition to some qualitative analysis. A detailed list of data sources is included in Annex 1.

Financial data analyses

State and district financial data were disaggregated into levels of care (primary, secondary, tertiary, medical education and administration) based on the categories developed by the National Health Systems Resource Center (NHSRC) in the Budget Tracking Toolkit. Table 3 below depicts how the budget heads were coded. The objects of expenditure in the State Budget were classified into the five cost input categories: ‘Human Resources’, ‘Operating Expenses’, ‘Capital Projects’, ‘Drugs & Pharmaceuticals’ and ‘Others’. To ensure uniform cost category-wise analysis across budget sources, we categorized the NHM expenditure data into the same five cost categories.

Table 3: Coding of budget heads using the NHSRC Budget Tracking Toolkit

Budget code Budget Lines/ Example with Code Type of care Hierarchy Heads Level 1 Major Head Medical and Public Health – Revenue Expenditure Head (2210) Level 2 Sub-major Head Public Health Head (06) Level 3 Minor Head Prevention and Control of Diseases (101) Level 4 Sub-minor head National TB Program (04) PRIMARY CARE Level 5 Detailed Head Drugs and Medicines (60)

Assumptions:

a. The Budget Tracking Toolkit of the National Health Systems Resource Center (NHSRC) was used for classifying budgets and expenditure into levels of care. Since budget codes are not uniform across states, wherever there was a conflict between category to be assigned to a particular budget code as per the NHSRC toolkit and the description of the budget line, we used the state’s budget line description to assign the level of care.

b. For the study purposes, the entire NHM budget was considered as primary health care.

The 38 districts of Bihar were grouped into High-Priority districts and Non-High-Priority districts. Two criteria were chosen to rank the performance of these districts. The criteria were percentage of institutional deliveries and percentage of caesarean sections, to reflect the efficacy of the public health system in attracting and serving the people with quality healthcare. Six districts were selected.

• Bhagalpur, best performing non-High Priority district,

• Darbhanga, worst performing non-High Priority district,

• Sheohar, worst performing High Priority district,

• Kishanganj, one of the best performing High Priority district,

7 Methodology Tracking financial resources for primary health care in BIHAR, India

• Patna, the state capital and an average performing non-High Priority district,

• East Champaran, among the worst performing High Priority district with special focus given by the State Health Society Bihar (SHSB).

Details on health expenditures incurred by these districts are included in Annex 2. A qualitative study was undertaken in the same districts to understand the context and perceptions of beneficiaries and stakeholders on issues around equity, efficiency and quality of health care services. The two units at each level – district, block, Additional Primary Health Center (APHC), SHC and Village Health Sanitation and Nutrition Committees (VHSNC) – were selected on the basis of best and least performing units in terms of both expenditure and coverage indicators.

Table 4 below presents the number of sample units studied and the type of qualitative study tool used to gather insights.

Table 4: Sample units & tools for the qualitative component

Levels Units Sample units Study Tool Department of Finance and Planning 01 In-depth Interview (IDI) State Directorate of Health & Family Welfare 01 IDI State Health Society 01 IDI District District Health Society 06 IDI Block PHC 12 IDI VHSNC 12 Focus Group Discussions (FGD) Village ASHA 12 FGD Women’s groups 12 FGD

The IDIs and FGDs were conducted by trained field investigators, and coordinated by a local Non-Government Organization (NGO) working on health and development issues in rural Bihar. The tools were developed and tested in Patna district in August 2015. The dimensions and issues covered in the study were monitored closely and after data saturation was observed, further FGDs and IDIs, although planned, were not carried out.

Limitations

1. Limitations in financial data related to treasury funds

For treasury financial data the study scope was limited to the Department of Health and Family Welfare. Health related budgets and expenditure in non-health ministries, if any, were not included.

2. Limitations in financial data related to NHM funds

The financial management system under the NHM is structured program-wise, for example Mission Flexi Pool, RCH Flexi Pool etc. making it difficult to estimate expenditures by types of inputs. Financial Management Reports (FMRs) under the NHM are the only source for disaggregating budget and expenditure data into different cost or input categories. The mapping of the FMR to cost categories is limited to only 2 financial years 2012-13 and 2013-14. This was not possible for previous years because of quality and availability of data in the FMRs. Hence for analyzing expenditure by cost inputs, shares of cost inputs calculated based on FMR for 2012- 13 have been used for all previous years.

8 Methodology Tracking financial resources for primary health care in BIHAR, India

Definitions

• Types of health facilities

Table 5: Type of health facilities as per population norms under the Indian Public Health Standards

Type of Health Facility Population norms Basic features

Village level: 5,000 population in Staffed by one male multipurpose worker SHC plain areas and for every 3,000 pop- (MPW/M) and one female multipurpose worker ulation in hilly/tribal/desert areas. (MPW/F) or ANM. With 4-6 indoor/observation beds, it is staffed Block Level: 30,000 population in by a Medical Officer and acts as a referral unit PHC plain areas and 20,000 in hilly, trib- for 6 sub-centres and refers out cases to higher al, or difficult areas. order public hospitals. Block Level: 4 PHCs are included 30-bedded hospital providing specialist care in under each CHC thus catering to a Medicine, Obstetrics and Gynaecology, Surgery CHC population of approximately 80,000 and Paediatrics with the help of regular appoint- in tribal/hilly areas and a population ed medical experts. It is the first referral unit for of 120,000 in the plains. the PHCs falling under its area. Subdivision Hospital: It caters to It has an important role to play as First Referral about 5-6 lakh (0.5-0.6 million) Units for PHCs and CHCs in providing emer- people. Depending upon size of a 31-100 bedded hospital gency obstetrics care and neonatal care. It fills sub-division, a sub-divisional hos- the gap between the block level hospitals and pital can be 31 to 50 or 51 to 100 the district hospitals. bedded. District Hospital: Every district is expected to have a district hospital District hospitals are an essential component 101- 200 bedded hospital linked with the public hospitals/ of the district health system and functions as a 201-300 bedded hospital health centres down below the dis- secondary level of health care which provides 301-500 bedded hospital trict such as Sub-district/Sub-divi- curative, preventive and promotive health care sional hospitals, CHCs, PHCs and services to the people in the district. SHCs. Source: MoHFW, Government of India

• What are ‘Budget Estimates’, ‘Revised Estimates’ and ‘Actuals’? 3,4

‘Budget Estimates’ - Budget Estimate is the initial planned spending amount announced before the beginning of the fiscal year. It is based on advance estimates of receipts and expenditure of a financial year.

‘Revised Estimate’ - Revised estimate is a revision to the budget estimate issued approximately in the 3rd quarter of the fiscal year reflecting adjustments in revenue estimates and spending estimates.

3 Budget Manual, Budget Division, Dept of Economic Affairs, Ministry of Finance, Government of India, 2010 4 How to Read the Union Budget, PRS Legislative Research, Center for Policy Research, 2010

9 Methodology Tracking financial resources for primary health care in BIHAR, India

‘Actual’ expenditures are the final audited amounts spent under different heads and may exceed (or fall short of) the Revised Estimates. Since the actual expenditure can only be assessed once the financial year is over and final accounts have been prepared and audited, the Actual expenditures presented in the budget papers are for the earlier financial year.

• Fund flow routes: - Treasury and Society

Treasury Route: Refers to the flow of all funds, including funds from the state government (own tax revenue) and the central government grants, which are routed through and spent directly out of the State Treasury.

Society Route: Refers to the flow of funds, including funds from the state government and the central government grants that are routed through and spent directly out of the State Health Society. The state treasury has little oversight on society route spending.

10 Methodology Tracking financial resources for primary health care in BIHAR, India

4. Budgeting and fund flow processes

In Bihar, the treasury route health budget has largely been based on historical budgeting with little regard for actual cost of delivering intended services or resource productivity. NHM has been an important addition to state resources with a focus on strengthening primary health care. However, for NHM the bottom up planning intended to capture local realities and increase innovation and prioritize health appropriately is hampered by low planning and budgeting capacity to develop credible plans and budgets.

Process of budgeting and allocations under the treasury route

Bihar has more than 700 Drawing & Disbursing Officers (DDOs) at different levels under the Department of Health and Family Welfare (DoHFW). Budget preparation under the treasury route begins with the DDOs at the block level preparing their estimates for the upcoming financial year, which are then forwarded to district level officers, where the block budgets are compiled, consolidated and submitted to the finance unit of the DoHFW at the state level. At the state level these estimates are reviewed, and aggregated for the approval of the Principal Secretary of the Department and then on to the Finance Department for negotiations.

The health (sector) budgets are finalized for approval based on the overall resource envelope expected to be available for the entire state for that fiscal year. All department budgets are compiled by the finance department to prepare the overall state budget with the involvement of the Accountant General, following which it is presented in the State Legislative Assembly for legislative scrutiny and approval. Past expenditure trends, existing commitments and obligations are factored in and an incremental approach is followed to arrive at the estimates at all level. There is extremely limited evidence of need based planning and budgeting under the treasury route. Once approved, the Finance Department makes appropriate allocations for the DoHFW and the districts.

Planning and budgeting under the NHM

The process of planning, budgeting and approval under NHM takes about six to eight months. Based on overall resource envelope communicated by the Government of India to the state and the planning guidelines issued, the process is led by the State Health Society Bihar (SHSB). The District Program Management Unit seeks inputs from each of the blocks to prepare the District Action Plan and the budget. Previous year’s progress and the gaps form the basis for planning for the year ahead. District Action Plans are finally approved by the respective District Health Societies and shared with the SHSB for further action. SHSB reviews and negotiates the respective plans and budgets with the districts and includes state level activities to consolidate and finalize the State Project Implementation Plan (SPIP). This SPIP is then sent to the NHM unit in Government of India.

After detailed review, a coordination meeting is held between the Government of India (GoI) and the state NHM team for final presentation, discussions and approval. Typically, between May and July each year, GoI sends the Record of Proceedings (ROP) to the states, communicating the approval decision and related details.

The ROP contains the overall allocation for the year and the budget approved including details of all approvals awarded by the GoI for each proposed budget line, based on which the SHSB determines the final allocations for the districts for that year.

Later in the year, SHSB may submit supplementary plans as per emerging need to the GoI for approval. All such subsequent approvals are communicated to the SHSB through Supplementary Record of Proceedings.

Budget and expenditure flows at all levels

The channels of budget and expenditure flows across all levels of healthcare in the public health system, is depicted in the Figure 2 below.

11 Budgeting and fund flow processes Tracking financial resources for primary health care in BIHAR, India

Figure 2: Channels of Treasury and Society budgets for health

Central Revenue Pool

Centrally administered Hospitals Central MoHFW and Health Programs Treasury State share of CSS/CSP/NHM Central Revenues State State Health State Health Department Treasury Society Health Programs State District District District Revenue Health (CMO) Hospital Pool Society Sub Division Hospital Block LEGENDS Block CHC Health (BMO) Treasury Budget Society NHM/Off Budget (Society route) PHC Offices responsible for Treasury Budget Committees responsible for NHM (Society) Budget Secondary Healthcare Facilities Sub Centre VHSC Primary Healthcare Facilities

Employing the National Health Accounts (NHA) matrix, is the best way to understand what are the sources of funds and who manages them. We have developed a simplistic NHA matrix for the last two years for Bihar:

Table 6: Sources and managers of funds in Bihar health system (in million Rs)

NHA Table for 2012-13 NHA Table for 2013-14 Financing Agents Financing Agents Sources Total Percent Sources Total Percent State NHM State NHM State 14,042 3,986 18,028 59.28% State 15,609 3,636 19,245 56.54% Center 2,780 9,603 1 2,383 40.72% Center 3,121 11,670 14,791 43.46% Total 1 6,822 1 3,589 30,411 Total 1 8,730 15,306 34,036 Percent 55.32% 44.68% Percent 55.03% 44.97%

Note: Central revenue grants to the state are captured as a state source.

We see that 45 percent of the funds are managed by the NHM/SHSB thereby making it an almost equal custodian along with the state machinery with the responsibility of ensuring optimal utilization of available resources.

12 Budgeting and fund flow processes Tracking financial resources for primary health care in BIHAR, India

Fund channels and flow under NHM

Until 2013-14, the central funding of NHM used to flow to the states through two channels. Most of the central support was routed directly to the SHSB and a small portion of the approved budget earmarked for Infrastructure and Maintenance component was directly transferred to the State through the treasury route. As a part of streamlining channels of funding and ensuring greater oversight by the state, Government of India changed its policy in 2014-15 and now all central support goes directly to the treasury account of the state from where funds earmarked for the SHSB are transferred by the state to the SHSB. Some state level officers anticipate delays in release of funds from the Treasury to the SHSB. This concern is not unfounded as the 93rd Parliamentary Standing Committee for the Department of Health and Family Welfare has already recorded significant delays in onward transfer of central funds from the state treasuries to the Societies across states (GOI, 2016).

13 Budgeting and fund flow processes Tracking financial resources for primary health care in BIHAR, India

5.Results

Resource mobilization – trends and analysis

Fiscal space within Bihar

Bihar has had a sluggish economy since independence. However, in recent years its economy is among the fastest growing state economies in India with the rate of growth higher than the national average. In 2014-15 Bihar’s GSDP is estimated at Rs 4,022 billion, growing faster than Maharashtra, Punjab, Tamil Nadu and Karnataka. Despite the GSDP at current prices growing at an average rate of approximately 18 percent per annum (real growth 9 percent) in the last ten years, the per capita income at Rs. 39,623, is only about 45 percent of the national average in 2014-15.

As seen in Figure 3, Bihar’s capacity to generate its own revenue (tax and non-tax revenue) has increased eight times and central government’s support increased five times in the same time period. While this growth in generating revenue for the state appears to be impressive, Bihar’s ability to expand its tax base is very limited. The Annual Bihar Economic Survey reveals that the state’s tax-to GSDP ratio was less than 6 percent in the year 2013-14. It has remained stagnant for the last 5 years, when in 2009-10 it was 4.97 percent (GoB, 2016).

Figure 3: State’s own revenues and central support

Contributions of state's own revenue and central support to Bihar (in billion Rs)

States own revenues Center support

689 670

474 422 378 337 343 288 257 258 226 215 185 174 138 135 98 109 73 41 45 56

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 (RE) 2015-16 (BE)

Bihar remains heavily dependent on central funds. Central funds5 as a share of total revenue (State and Central combined) receipts was at its peak of 80 percent in 2006-07 and 2007-08 and has gradually declined to 67 percent in 2015-16 (Budget Estimates). The mix of central support, however, has changed following the 14th Finance Commission (FC) recommendations, the Central transfers in the form of sector specific grants have reduced by about 37 percent between 2014-15 and 2015-16 (BE), but the share in central taxes is up by 33 percent (see Figure 4).

5 Including share in central taxes and other grants from the center

14 Results Tracking financial resources for primary health care in BIHAR, India

Figure 4: Composition of central funds to Bihar

Central grants and share of central taxes to Bihar (in billion Rs)

Central grant Share of central taxes

507

381 348 319 279 289 240

168 177 182 182 133 126 104 97 99 103 80 76 52 58 33

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 (RE) (BE)

Following the 14th FC recommendations and the fiscal devolution, the central government has fewer resources to increase its direct investment in social sectors in the states. The new arrangement now puts the onus on the states to decide whether or not to prioritize the health sector. One year since the recommendations were implemented, some of the less developed states like Chattisgarh, Jharkhand, Madhya Pradesh, and Rajasthan have actually prioritized social sectors. However, in Bihar, the levels of investment in social sectors has reduced (Kapur et al., 2016). Analysis of 2015-16 data clearly reveals that the state has significantly deprioritized social sector6 investments (from 49 percent in 2013-14 to 42 percent in 2015-16). See Figure 5. Only time will tell whether this is just a chance occurrence or a conscious lack of political prioritization of health. FY 2015-16 are Budget Estimates, whereas for all other years, the values are Revised Estimates.

Figure 5: Allocation of funds across sectors in Bihar

Allocations of funds across sector over time

Social services General services Residual (Economic + Grants)

14% 20% 19% 21% 21% 22% 24% 24% 23% 22% 25%

48% 34% 29% 43% 42% 37% 36% 34% 33% 32% 33%

49% 45% 42% 43% 43% 44% 38% 37% 39% 42% 42%

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 RE RE RE RE RE RE RE RE RE RE BE

6 Social services include expenditure education, sports, art & culture, medical and health, family welfare, water supply & sanitation, housing, urban development, welfare for scheduled castes & tribes, nutrition, etc.; General Services (non-development) include fiscal and administrative services, lotteries, etc.; Economic Services include agriculture & allied activities, rural development, special area program, irrigation and flood control, energy (including power), industry and minerals, transport, science & technology, ports, tourism, etc.; Grants refer to Grants from Government of India which are allocated under State Plan Schemes, Central Plan Schemes, Special Plan Schemes, and non-plan Grants.

15 Results Tracking financial resources for primary health care in BIHAR, India

Senior state officials overseeing the state financing and planning functions have raised concerns about the central government’s insistence, following the 14th FC recommendations, on an equal contribution between state and center to development and plan expenditures. They noted in key informant interviews that a higher contribution is not feasible for a resource-starved state like Bihar. The state, they argue, should be granted a “special category” status, which would imply 90-10 ratio of center-state funds. In the current circumstances, the state cannot mobilize any additional resources to health without compromising some other sectors.

Total health budget by sources

Joint efforts of the state and the central government have ensured that the Total Government Health Budget (TGHB) in Bihar has more than doubled between 2008-09 and 2013-14 in nominal terms. The TGHB is 2013-14 was Rs. 47,401 million (Rs 23,918 million at 2004-05 prices), approximately 59 percent of which was contributed by the state. Refer to Table 7 for details.

Table 7: Total government health budget by source

Source Nominal/Real 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Nominal 13,836 1 4,437 16,305 22,912 24,711 27,787 State Government Real 1 0,445 10,027 1 0,427 1 3,521 13,374 14,021 Nominal 10,920 1 3,345 1 4,061 1 4,838 1 9,355 1 9,613 Central Government Real 8 ,244 9 ,269 8,992 8 ,756 1 0,475 9,897 Nominal 24,755 27,782 30,366 37,750 44,066 47,401 TGHB Real 18,689 19,296 19,419 22,277 23,849 23,918 Central contribution to total government health budget 44% 48% 46% 39% 44% 41% (All figures are in million Rupees, Real values are adjusted at 2004-05 prices

A large part of the center’s contribution to Bihar’s health budgets has come from the National Health Mission (NHM). The share of NHM (state and center contributions) in the TGHB has ranged between 36 percent and 46 percent during the study years, with the NHM’s share slightly dipping to 43 percent in 2013-14. Figure 6 below presents the details.

Figure 6: Bihar health budgets over time

Bihar health budget (in Rs million)

State health budget (excluding NHM) NHM (all routes)

20,169 20,371 13,452

12,739 12,547 9,786

8,493 27,231 24,298 23,695 14,969 15,235 17,627 10,682

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

16 Results Tracking financial resources for primary health care in BIHAR, India

Key messages

. Increases in health budgets (center and state) have not kept pace with the growing economy despite sharp increases in GSDP. On the contrary, resource mobilization for health as a share of GSDP has declined in the most recent two years.

. Total health budget has almost doubled between 2008-09 and 2013-14, with the state share increasing two times and center’s share increasing by 1.8 times during the same period.

. Current levels of government budget for health are likely to be insufficient to significantly reduce out-of- pocket expenditures.

. In 1 year since the 14 FC recommendations, Bihar’s allocation to social sectors has decreased from 49 percent to 42 percent of its total budget.

Resource allocation – trends and analysis

Allocations by levels of care

The methodology to estimate primary care expenditures uses the budget-tracking tool developed by the National Health System Resource Center (NHSRC). Each budget item at the sub-minor treasury budget code level was coded to estimate the allocations by level of care – primary, secondary and tertiary.

Normative estimates of the costing of primary care package of services range from $32 per capita per year to $67 per capita per year (Deolalikar et al., 2008; GoI, 2005; WHO, 2001; World Bank, 1995; Prinja et al., 2012). In 2013-14 Bihar had an allocation of only Rs 326 per capita for primary care (approximately US$ 5).

Total government budget allocation (State Treasury and NHM) for primary care increased from Rs 13,325 million in 2007-08 to Rs. 32,695 million in 2013-14. The state allocations prioritize primary care, with an average allocation of approximately 70 percent of its budget. Despite the substantial share, the per capita amount remains inadequate. Figure 7 presents the allocation to primary care over time.

Figure 7: Budget allocation by levels of care

Budget allocation by levels of care 80% 73% 74% 71% 69% 70% 69% 70% 67%

60%

50%

40%

30%

20%

10%

0% 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Primary care Secondary care Tertiary care Medical Education Administration

Plan versus Non-plan and Capital versus Revenue allocations

Prior to 2014, the Planning Commission formulated the five-year plans and led decision-making on central allocations to states from development funds. In theory, the “plan” funds represented new projects/initiatives, capital

17 Results Tracking financial resources for primary health care in BIHAR, India

projects etc. The “non-plan” funds in theory constituted routine funding of continued recurrent expenditures. However, in actual practice in the health sector this distinction has not been applied systematically. For example, the Infrastructure and Maintenance grants, which are effectively the former family welfare allocations, remained “plan” for decades, even though they are largely recurrent expenditures for long-existing facilities. The Planning Commission’s somewhat unstructured growth, and the political influences exerted over it by the ruling parties, have resulted in complex center and state financing arrangements particularly in the health sector (Prakash et al., 2014). It is useful to understand the allocation of both plan and non-plan and capital and revenue classifications. The trends in resource allocation through plan and non-plan and capital and revenue classifications are presented in Figure 8.

Figure 8: Resource allocation ratios

Allocation as share of treasury route budget (TRB)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Plan as a share of TRB 25% 23% 21% 28% 31% 33% 33% Non-plan as a share of TRB 75% 77% 79% 72% 69% 67% 67% Capital as a share of TRB 10% 10% 8% 9% 15% 18% 19% Revenue as a share of TRB 90% 90% 92% 91% 85% 82% 81%

Plan as a share of TRB Non-plan as a share of TRB Capital as a share of TRB Revenue as a share of TRB

Key messages

• Allocation for primary care ranges between 67 and 74 percent during the study years, largely due to increased NHM allocations.

• Primary care allocation at Rs 326 per capita is one of the lowest in the country and far below the normative estimates of what is needed to support a good package of primary care services. This low level of investment is insufficient to finance a substantive program of good quality services for the population.

Health expenditure analysis

Overall trends

Paradoxically, low allocations to health in Bihar are also accompanied by under spending of available funds. Health expenditure trends in Bihar between 2007-08 and 2013-14 present a story of very low actual spending - combining low budgets with underuse. A brief look at Table 8 below highlights how poor utilization further shrinks the health budget. On an average almost 25 percent of the budget is unused. Table 9 presents some key health expenditure indicators over time.

A detailed look at the utilization of funds is included in the subsequent section that explores reasons for underutilization.

18 Results Tracking financial resources for primary health care in BIHAR, India

Table 8: Total Government Health Budget and Expenditure in Bihar

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Budget (RE) 19,174 24,755 27,782 30,366 37,750 44,066 47,401 Total Expenditure (Accounts) 14,720 19,439 18,677 23,028 26,898 30,411 34,036 Ratio of Expenditure to Budget 77% 79% 67% 76% 71% 69% 72%

Bihar’s health expenditure trends over the last 7 years is presented in Table 9 below.

Table 9: Health expenditure trends in Bihar

No. Indicators 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 State 1 Population (in millions) 92.21 93.63 95.03 96.39 97.72 99.02 100.29 2 Population Growth (%) 1.55 1.49 1.43 1.38 1.33 1.28 3 GSDP (in Rs billion) 1,137 1,423 1,629 2,036 2,433 2,936 3,437 4 GSDP growth rate (%) 25 15 25 20 21 17 Total Government Health Expenditure (TGHE) 5 TGHE in Rs. millions (nominal) 14,720 19,439 18,677 23,028 26,898 30,411 34,036 6 TGHE in Rs. millions (real, at 2004-05 prices) 13,645 17,143 15,407 17,384 18,682 19,448 20,085 7 Total expenditure under NHM (nominal) Rs million 3,826 10,927 7,839 14,186 11,074 13,589 15,306 8 NHM's share in TGHE (%) 25.99 56.21 41.97 61.60 41.17 44.68 44.97 9 Center's share in TGHE 22.68 57.39 40.02 66.65 39.55 40.72 43.46 Health expenditure through treasury as a share of total 10 4.63 3.64 3.7 3.44 3.71 3.63 3.33 state expenditure (%) 11 TGHE as a share of total state expenditure (%) 4.92 5.48 4.58 4.75 4.7 4.6 4.4 12 State health expenditure as a share of GSDP (%) 1 0.58 0.69 0.38 0.67 0.61 0.56 13 TGHE as a share of GSDP (%) 1.29 1.37 1.15 1.13 1.11 1.04 0.99 14 Annual per capita TGHE (in nominal Rs.) 159.64 207.61 196.55 238.90 275.26 307.12 339.37 15 Annual per capita TGHE (in Rs., Real at 2004-05 prices) 147.98 183.09 162.13 180.36 191.18 196.40 200.27 Government Primary Care Expenditure (GPCE) 16 GPCE Rs million 10,273 14,109 12,603 17,049 17,586 20,278 22,253 17 GPCE (Real) Rs million 8,474 10,651 8,754 10,902 10,378 10,975 11,229 18 Per capita GPCE (Nominal) in Rs 111 151 133 177 180 205 222 19 Per capita GPCE (Real) in Rs 92 114 92 113 106 111 112 Others Capital expenditure as a share of health expenditure 20 18.97 9.02 9.61 11.78 17.01 25.01 17.79 through the treasury route (%) Drugs & pharmaceutical expenditure as a share of 21 2.93 6.14 5.51 5.88 5.78 5.65 5.57 TGHE (%) Per capita expenditure on drugs & pharmaceuticals 4.68 12.74 10.84 14.06 15.92 17.37 18.91 2222 (in nominal Rs.)

The TGHE in 2013-14 is Rs 34,036 million, a nominal 2.3 fold increase in the seven years and an increase of 1.5 times in real terms. During the same time period the role of the NHM has increased substantially, for the last three years NHM contributed 41-45 percent of the TGHE. NHM’s share was 26 percent in 2007-08. See Figure 9.

19 Results Tracking financial resources for primary health care in BIHAR, India

Figure 9: Bihar total health expenditure (nominal, in Rs million)

Total Government Health Expenditure (nominal, Rs. million) 40,000 120% 35,000 100% 30,000 26% 80% 25,000 42% 41% 45% 45% 56% 62% 20,000 60% 15,000 40% 10,000 20% 5,000 - 0% 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Health Expenditure (excluding NHM) NHM Total

Another concern is the erratic growth rate of TGHE which reflects year-to-year variations in both center and state spending on health in Bihar. Such an erratic growth rate reflects poor planning and budgeting. See Figure 10.

Figure 10: Relative growth rate of health expenditure in Bihar

Relative growth rateRelative of Government growth Healthrate of ExpenditureTGHE in Bihar TGHE in Bihar 250%

200%

150%

100%

50%

0%

-50% 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 State share in TGHE -27% 35% -31% 112% 11% 7% Central share in TGHE 234% -33% 105% -31% 16% 19% TGHE 32% -4% 23% 17% 13% 12%

State share in TGHE Central share in TGHE TGHE

Figure 11 presents the per capita expenditure on health in Bihar from 2007-08 to 2013-14. As noted earlier the total amount is very low and reflects further reduction due to underutilization of budgeted funds. Bihar also has a high fertility rate of 3.5, which is well above the national average of 2.3. This further erodes per capita spending levels. In real terms in 2013-14, the per capita expenditure (adjusted at 2004-05 prices) is only Rs. 200, only a modest change from the earlier period.

20 Results Tracking financial resources for primary health care in BIHAR, India

Figure 11: Per capita TGHE

Per capita TGHE (in Rs.)

Per capita State Health Expenditure Per capita GoI Health Expenditure Per capita Total Government Health Expenditure

339 307 275 239 147 208 125 197 109 160 79 159 36 119 192 166 182 123 118 88 80

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 In Rs.

Key messages:

• In nominal terms the TGHE has grown by 2.31 times (1.5 times in real terms)

• Center’s contribution has increased substantially by 4 times, in contrast with the state share in expenditure, which grew by only 1.7 times despite rapid GSDP growth. This raises the question as to whether growing central funding is enabling the state to spend less of its own resources on health.

• TGHE per capita is among the lowest in the country at Rs 339 nominal. Rapid population growth in Bihar further erodes the growth in per capita amounts relative to other states.

Expenditure by levels of care with focus on primary care

Primary care as a share of TGHE has ranged between 65 percent and 74 percent during the study years and is experiencing a gradual declining trend the last 3 years. Through the treasury route, the share of primary care expenditure was 68 percent in 2007-08 and has gradually declined to 54 percent in 2013-14. A substantial portion of the treasury expenditure pays for salaries, and this decline in state/treasury funding may exacerbate the problem of shortage of human resources. NHM has made a strong positive impact on the total primary care expenditure in the state. A complete picture of primary care expenditure is presented in Table 10

Table 10: Primary care expenditure through different routes

Routes of primary care expenditure 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Primary care expenditure through the Treasury route* 7 , 687 6 , 421 6 , 855 9 , 7 35 8 , 997 9 ,865 1 0 ,317 Primary care expenditure through State Health Society 2 , 586 7 ,688 5 , 7 48 7 , 3 13 8 ,589 1 0,414 1 1 ,936 Total primary care expenditure 1 0 ,273 1 4,109 1 2 ,603 1 7 ,049 1 7 ,586 2 0,278 2 2 ,253 Primary care as a share of TGHE 70% 73% 67% 74% 65% 67% 65% * excluding state share for NHM

Though in nominal terms the per capita primary care expenditure doubled between 2007-08 and 2013-14 (Rs 222), it has plateaued since 2010-11 with no discernable increase in real terms. The real increase is merely 22 percent in seven years. See Figure 12.

21 Results Tracking financial resources for primary health care in BIHAR, India

Figure 12: Per capita expenditure on primary care

Per capita expenditure on primary care in Bihar

222 205

177 180

151 133 111

114 113 106 111 112 92 92

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Nominal Real

Since our study assumes NHM to be 100 percent primary care, we analyzed only the treasury expenditure by health care functions. Analysis reveals a steady growth in the shares of expenditure for secondary care, tertiary care and medical education, with the share of medical education higher in 2013-14 than the last seven years mean share. See Figure 13.

Figure 13: Health expenditure trend by functions (treasury route only)

Expenditure trend by functions 2007 to 2014 (Treasury route only) 80% 68% 70% 59% 60% 54% 50%

40%

30% 18% 20% 15% 12% 13% 11% 13% 9% 11% 9% 10% 3% 3% 2% 0% Primary care Secondary care Tertiary care Medical Education Administration

2007-08 Mean (2007-2014) 2013-14

Investments in secondary care and medical education have increased over time; however, they have been made at the expense of primary care, as proportion of primary care spending through the treasury route has declined. In a health system where, based on the National Health Accounts 2013-14 estimates, nationally 64.2 percent of the healthcare expenditure is out-of-pocket, declining government primary care expenditure may have impoverishing and catastrophic consequences (MoHFW, 2016). In Bihar, based on the National Sample Survey, the study revealed that 6 percent of all households in Bihar fell below the poverty line due to catastrophic health care expenditure and that a large part of the out of pocket spending was primary care related (Berman et al., 2010). 22 Results Tracking financial resources for primary health care in BIHAR, India

Such low expenditure levels in Bihar cannot help but have a direct impact on the quality and accessibility of services particularly affecting the most vulnerable beneficiaries. Human resource shortage, especially of nursing staff and specialists; lack of training; gaps in needed infrastructure; and shortages of medicines and instruments and labor room essentials are some of the observed gaps at the facility level that contribute to poor health care performance (BTAST, 2016). Anecdotal evidence emerging from FGDs is consistent with the BTAST – DFID study, where women at the village level perceive that though cleanliness in health centers has improved, other indicators like time spent by doctors, waiting time at the center, availability of medicines, referral transport facilities still leave much to be desired, and that the overall quality of care continues to be poor.

Key messages:

. Per capita expenditure on primary care has doubled to Rs 222 (nominal) in 2013-14 as compared to 2007- 08. Real per capita expenditure on primary care is Rs 112 in 2004-05 rupees, only a modest increase from the previous period.

. Primary care as a share of TGHE has ranged between 65 and 74 percent and is experiencing a gradual declining trend with the share in 2013-14 being 65 percent. This overall decline can be partially contributed to slowing down of state’s expenditures on primary care from its own resources.

Expenditure by type of inputs

The state treasury spends most of its funds on human resources, whereas the NHM spends most of its money on program implementation7. In addition, NHM also augments the state by supporting the human resource gaps. See Figure 14 for details.

Figure 14: Expenditure by types of inputs: 2012-13 & 2013-14

Expenditure by inputs 2012-13 & 2013-14

70% 62% 65% 56% 60% 53% 50% 40% 25% 30% 24% 22% 18% 20% 14% 14% 9% 5% 5% 7% 5% 7% 10% 2% 2% 3% 2% 0% State NHM State NHM 2012-13 2013-14

Human Resource Operating Expenses Drugs & Pharmaceuticals Capital projects Others (Treasury) / Program Implementation (NHM)

One area where NHM has made a significant contribution is access to medicines. It has contributed to approximately 28 percent of the expenditure on drugs and pharmaceuticals. Despite this substantial contribution from NHM,

7 Program costs for NHM typically include: Post service trainings – medical and para-medical staff, provision of Special Health care ser- vices including medicines (Reproductive tract infection, sexually transmitted diseases), Rural institutional deliveries, ASHA incentives, Compensation for male and female sterilization, etc.

23 Results Tracking financial resources for primary health care in BIHAR, India

the per capita annual expenditure on medicines is merely Rs 19. Table 11 provides a complete picture related to expenditure on drugs and pharmaceuticals.

Table 11: Expenditure on drugs & pharmaceuticals

Expenditure on Drugs & pharmaceuticals 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Through Treasury route (in million Rs) 370 7 1 4 766 889 1 , 1 42 1 , 2 49 1 , 3 50 Through NHM (in million Rs) 62 4 7 9 263 466 414 4 7 1 547 Total expenditure (in million Rs) 4 3 2 1 , 193 1 , 0 30 1 , 3 55 1 , 556 1 , 720 1 , 8 97 Total annual per capita expenditure (in Rs) 5 13 11 14 16 17 19 NHM's share in total expenditure 14% 40% 26% 34% 27% 27% 29% Proportion of TGHE 3% 6% 6% 6% 6% 6% 6%

The Bihar Medical Services & Infrastructure Corporation Limited, incorporated in 2010, is the sole procurement and distribution agency for medicines in the state. For government services, pharmaceutical supply often suffers from drug shortages; routine delays; inadequacy of funding, juxtaposed with underutilization of the budgeted funds; and irrational use of drugs (Selvaraj et al., 2010; Bose, 2015). Our analysis further confirms low allocation and expenditure on drugs and pharmaceuticals. It is ironic that the Indian pharmaceutical industry ranks 10th in the world in terms of value and 3rd in terms of volume of drugs, but its own citizens particularly in poor states like Bihar have very limited access to affordable quality medicines (McKinsey, 2014).

Weak procurement systems combined with low government spending on drugs limit access to medicines for citizens of Bihar. Bihar’s cash and carry model8, because of its decentralized payment structures and uncertain payment schedules, perpetrates a system where the suppliers hedge their risks of delayed or non-payment by quoting higher prices for drugs on the tender, thereby artificially inflating the cost of procuring these drugs. In addition, the procurement records are still not fully digitized, leading to inefficiency in forecasting, distribution and consumption of supplies (Chokshi et al., 2015).

The state has officially committed to move away from its “Cash-and-Carry” (decentralized payments and supply chain) system to Bihar Medical Equipment and Drugs System (BMEDS), much like the system in Tamil Nadu (The Tamil Nadu Medical Services Corporation or TNMSC). The state has also adopted an Essential Drug List (EDL) at the primary and secondary level government health facilities. However, as mentioned earlier shortages and stock- outs of antibiotics and injectables continue even among EDL items.

A recent study compared Tamil Nadu and Bihar based on the National Sample Survey (NSS), 71st round, found that availability of drugs in public health facilities in Bihar, on average ranged between 30-50 percent at best, whereas drug availability was 80-90 percent in Tamil Nadu (Selvaraj et al., 2010). Unsurprisingly, this level of shortages resulted in significant out of pocket expenditures on drugs in Bihar – almost Rs 600 per outpatient episode, where as it is Rs. 450 in Tamil Nadu. The study also revealed that only 1 percent of the patients accessing outpatient care in government hospitals in Bihar received free medicines as compared to 23 percent in Tamil Nadu (Selvaraj and Nabar, 2010). The shortages affecting antibiotics and injectables may be related to the issue of irrational prescription of drugs. The same study based on the NSS -71 revealed that the percent of healthcare encounters where injections were prescribed were three-and-half times higher in Bihar (4.9 percent) as compared to Tamil Nadu (1.4 percent).

Another qualitative study conducted by the Population Foundation of India (PFI), found that, while basic medicines are available most of the time at primary and secondary facilities, prescription drugs including antibiotics and

8 Volumes of required medicines are procured at a pre-determined rate and pooled at the state level, while actual invoicing and payment is done at the district level, as a result, the payment as well as supply chain systems become very fragmented.

24 Results Tracking financial resources for primary health care in BIHAR, India

injectables are not, and had to be purchased (out of pocket) in the private sector. Lack of adequate funding, coupled with an inefficient procurement system, have been cited as two key reasons for drug shortages. Anecdotally, it has been observed by district officials that following the 14th FC recommendations, which allows states more discretion in managing their money, there have been long delays in procurement and payment for pharmaceuticals (Pandey et al., 2015). It is not surprising then that almost 70 percent of the out of pocket expenditures on health is incurred for drugs as per the NSS 71st round. Shortage of medicines were also reported in responses from women’s groups and ASHAs in the FGDs conducted as a part of our qualitative study in villages around Patna. Respondents indicated that at times poor beneficiaries need to buy medicines ranging from Rs.500 to Rs.1000 per outpatient visit to a PHC.

While the pharmaceutical policy formulation is carried by the central government, its implementation is the responsibility of state governments. As a result, states like Tamil Nadu and Karnataka with better capacities and systems have much better affordability, availability, and quality of drugs than states like Bihar which lack robust procurement and supply chain management systems. Yet the most serious obstacle to better access for medicine in India remains the paucity of government funds for public health (Bose, 2015).

Key messages

• Despite NHM contribution, Bihar has a very low annual per capita expenditure on drugs – Rs 19 per capita.

• The pharmaceutical procurement and supply chain management system is not effective in ensuring a steady and reliable supply of drugs. The inadequacy of government provision of drugs and pharmaceutical may be an important cause of low access and utilization of public services especially for the poor.

. Households may incur very high out of pocket expenditures caused by the need to purchase required drugs in the market – as much as Rs. 500-1000 per outpatient episode. Since the state resources mostly pay for human resources, the slowing of its contribution to health is likely to have a direct impact on recruitment and retention of needed human resources.

Budget execution and budget utilization analysis

Bihar experiences a problem of resource scarcity compounded by low budget utilization, which further reduce the resources spent on health. This section delves deeper into understanding the causes and processes of budget underutilization.

The NHM fund flows routed through the SHSB include the RCH Flexi Pool; Mission Flexi Pool; NDCPs (National Disease Control Programs); routine immunization, while the component of “Infrastructure Maintenance” is routed through the state treasury.

Budgets through the treasury route have an average utilization rate of 77 percent for the last 6 years. During the same period utilization under NHM against total approved budget is 82 percent. However, NHM funds flowing through the SHSB allow unused balances to be carried over to subsequent years as committed and uncommitted expenses. The utilization of the total available funds, including balances from last year and interests earned, is 50 percent in 2013-14. See Figure 15.

25 Results Tracking financial resources for primary health care in BIHAR, India

Figure 15: Utilization of health budgets in Bihar: 2007-08 to 2013-14

UtilizationUtilization ofof healthhealth budgetsbudgets && fundsfunds availableavailable inin Bihar:Bihar: 20072007---0808 tototo 20132013---1414 Utilization of health budgets & (in(in(infunds percentage)percentage)percentage) available in Bihar: 2007--08 toto 2013--1414 ThroughThrough treasurytreasury routeroute (in(in percentage)percentage) NHMNHM Through(Demand(DemandThrough(Demand treasury treasury 20)20)20) route route (Demand 20) NHM(against(againstNHM(against (against approvedapprovedapproved approved budget)budget) budget)budget) NHM Through State Health NHM(Demand(Demand (against 20)20) totals funds available) Through(againstThrough(against State approved approvedState Health Health (against budget)budget) totals funds available) NHM(against(against(against totalstotalstotals fundsfundsfunds available)available)available) Through(against(against(against totalstotals totalsState fundsfundsHealthfunds available)available)available) (against(against112112 totalstotals fundsfunds available)available) 111111 (against(against totalstotals fundsfunds available)available) 104104 112112 111111 104104

8383 8282 7979 83 82 7777 7676 7373 79 7575 7575 79 7777 76 7373 6868 7575 6767 7575 76 6464 62 62 68 67 64 62 4949 5050 4545 44 4545 4545 44 4949 41 5050 45 45 45 41 3939 45 4444 45 45 35 3838 3333 35 4141 39 3030 35 3838 3131 39 3333 35 3030 3131

2007-082007-08 2008-092008-09 2009-102009-10 2010-112010-11 2011-122011-12 2012-132012-13 2013-142013-14 2007-082007-08 2008-092008-09 2009-102009-10 2010-112010-11 2011-122011-12 2012-132012-13 2013-142013-14 Since the SHSB manages 45 percent of the TGHE, a low utilization rate of the NHM funds at SHSB affects the overall utilization rates. For more details See Table 12.

Table 12: Budget Utilization for NHM in Bihar (In Rs. million)

NHM Utilization 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 NHM approved budget 9,786 12,547 12,739 13,452 20,371 20,169 Total funds available under NHM 17,172 17,463 20,709 22,755 33,239 30,736 Total expenditure under NHM 10,927 7,839 14,186 11,074 13,589 15,306 Overall utilization against approved budget 112% 62% 111% 82% 67% 76% Overall utilization against funds available 64% 45% 68% 49% 41% 50%

Our analysis further shows that in 2013-14 if the SHSB spent 100 percent of the funds available, the TGHE would have increased by 49 percent from the current expenditure of Rs. 34,036 million. In light of the overall shortage of funds, the underutilization of NHM budgets in Bihar, and more specifically within the SHSB, calls for urgent action from the policy makers.

Reasons for low utilization rates – unpacking the box

We first take a brief look at the treasury route and the 23 percent underutilized funds. We then do a deep dive within the finances of NHM/SHSB.

26 Results Tracking financial resources for primary health care in BIHAR, India

Treasury route

When analyzed by levels of care, utilization against allocations for primary care under the treasury route is about 76 percent, while utilization for secondary and tertiary care is slightly higher at 80 and 81 percent respectively. However, utilization for administration lags behind at 69 percent. When analyzed by types of inputs, operating costs and capital projects have a lower utilization rate as opposed to human resource and drugs and pharmaceuticals. It is not surprising to observe low utilization for capital projects as the time line for completing such projects tends to be longer than a year, the period at which an annual budget lapses. There are also barriers associated with obtaining the appropriate permits and delays in acquisition of land that contribute to the tardy pace of construction. See Figure 16.

Figure 16: Utilization rates by Cost Inputs & Levels of Care (treasury route)

Utilization rates by Cost Inputs Utilization rates by Levels of Care 100% 100% 90% 79% 81% 75% 75% 76% 80% 80% 71% 68% 70% 60% 60% 50% 42% 40% 40% 30% 20% 20% 2011-12 2012-13 2013-14 Mean Human Resource Operating Cost Drugs & Pharmaceuticals Capital Projects (2008-14) 2011-12 2012-13 2013-14 Mean (2008-14) Primary care Secondary care Tertary care Medical Education Administration

Areas of significant underspending include trainings under the National Disease Control Programs; construction of sub-health centers; allocations for technical advisory services; and supervision of State Family Welfare Bureaus and District Family Welfare Bureaus. Utilizations against total Plan and Non-Plan allocations range between 73 – 78 percent.

NHM

NHM was first launched in 2005 in 18 states with weak public health indicators, and eventually extended to all states. It was conceptualized to address some of the persistent systemic deficiencies in the health system, such as a fragmented approach to health care (too many vertical programs); weak or absent linkages to social and other health determinants including sanitation and clean water; inadequate financial resources, and administrative barriers to timely and effective spending.

The design of NHM included a number of innovative approaches – community focus; more flexible financing arrangements which included additional funding from the Center with matching funds from the State; improved planning and management through capacity building, use of untied grants, strong monitoring against standards; and finally innovations in human resource management (Nandan, 2010). Underutilization of NHM funds reflects both weak capacities at local level to plan and utilize more flexible funds as well as bottlenecks in the society route’s financial management systems and capacities.

Under the auspices of Panchayat Raj Institutions (PRI) a Village Health and Sanitation Committee (VHSC) is engaged in developing a sub-district plan which is then integrated into the district plan as part of “bottom-up” planning. District Health Plans are an important instrument of the National Health Mission. They form the basis for state health plans and budget requests from central government sources. Districts vary widely in their specific population needs and in capacity for innovation (GoI, 2007). Engagement of the PRIs should enable convergence of programs at the local level that address other determinants of health such as safe drinking water and sanitation. It should also provide local accountability in implementation of the programs.

27 Results Tracking financial resources for primary health care in BIHAR, India

The flexible financing includes a provision for untied funds of up to Rs. 10,000 at the facility level for the facility manager to address small operational problems quickly and effectively, using her or his own discretion. These funds could be used for a range of issues from buying medical consumables, to repairs; or small performance rewards to health volunteers. This was the first time such funds were made available at the facility level.

Finally, the process referred to as “communitization” formally encouraged partnering with NGOs for services ranging from service delivery; training; to various support services. This communitization process also encouraged several innovative actions to improve the operations at the facility level such as, renting or leasing vacant land on the premises of the facility to generate extra income; engaging with the community to maintain the upkeep of the facility; adopting sustainable practices ranging from rain-water harvesting to solar lighting and refrigeration. (Nandan, 2010)

The success of these innovations in NHM depends upon having well-functioning financial management systems and capacity and leadership at all levels. Due to the limited capacity and leadership at the various levels of government in Bihar they were not able to truly benefit from NHM’s flexible approach and financing and benefit from local innovation or solutions for local problems.

These constraints can be observed in spending patterns for the NHM budget lines that require greater local planning and innovation. For example, the budget heads under Mission Flexi Pool like communitization, untied grants to health facilities, and village committees are the budget lines that reflect the greatest under-utilization. Some of the areas of underutilization, as shown from analysis of the NHM Financial Management Reports (FMR), include:

• Selection and training of ASHAs including procurement and replenishment of ASHA drug kits and ASHA incentives.

• Untied funds specially at the level of Village Health and Sanitation Committees.

• Annual maintenance grants, especially at the level of PHC and below

• Construction of civil works/infrastructure

• Corpus grants, especially at the level of CHCs

• IEC and BCC component

• Procurement of equipment and drugs

• Maternal death reviews

• Quality assurance committees

Based on analysis of NHM FMRs in the last three years we see relatively high underutilization across different program components, with budgets for the NHM Flexi Pool (MFP) being the most unused. See Figure 17 .

28 Results Tracking financial resources for primary health care in BIHAR, India

Figure 17: NHM utilization by program component

Proportion of RCH Flexipool spending Proportion of NHM Flexipool spending 25,000 25,000 19,488 19,488 18,309 18,309 20,000 20,000 13,739 15,000 13,739 15,000 10,134 10,070 10,000 10,000 7,016 6,183 2,733 6,225 7,600 5,000 7,553 5,000 4,637 5,358 2,947 2,926 - - 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14

Total NHM budget RCH Flexipool Component Budget Total NHM budget NHM Flexipool Budget Budget RCH Flexipool Actual Expenditure NHM Flexipool Actual Expenditure

The Mission Flexi Pool, as the name suggests, includes budget lines that encourage flexibility in spending to encourage innovation at the local level. In the absence of strong empowered leadership skills; management and planning capacity; and a transparent monitoring system allocations for communitization and grants to health facilities and village committees reflect significant under-utilization. Figure 18 presents the expenditure trends for the last three years for most of the individual budget lines of MFP9.

Figure 18: Utilization of Mission Flexi Pool budget lines under NHM

Mission Flexipool Utilizations MissionMission Flexipool Flexipool UtilizationsUtilizations MissionMission Flexipool Flexipool UtilizationsUtilizations MIssionMission Flexipool Flexipool UtilizationsUtilizations 90% 90%80% 80% 70%70% 60% 50%60% 40%50% 30% 20%40% 10% 0%30% 13 13 13 13 13 13 14 14 14 14 14 14 20% 12 12 12 12 12 12 ------13 13 13 13 13 14 14 14 14 14 12 12 12 12 12 13 13 13 13 13 14 14 14 14 14 12 12 12 12 12 ------10% ------2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 0% 2013 2013 2013 2013 2013 2013 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 MMU RT PPP INNO' PIMPROCUREMENTPROCURE- 2011-12 2011-12 2011-12 2011-12 2011-12 2012-13 2012-13 2012-13 2012-13 2012-13 ASHA 2013-14 UF 2013-14 AMG 2013-14 HS 2013-14 Civil 2013-14 Corpus DAP PRI AYUSH IEC/BCC MENT ASHA UF AMG HS Civil

Trends emerging from the financial data, review of audit reports and discussions with officials at different levels triangulate the same finding and highlight the under-utilization in areas of human resources; procurement; pharmaceuticals; civil construction; and expenditure related to ASHAs. See Figure 19.

9 UF: Untied Funds; AMG: Annual Maintenance Grants; HS: Hospital Strengthening; Civil: New Constructions / Renovation / setting up; Corpus: Corpus Grants to Rogi Kalyan Samities; DAP: District Action Plans (including block & village plans; PRI: Panchayati Raj Institutions; AYUSH: Alternative Systems of Medicine; MMU: Mobile Medical Units; RT: Referral Transport; INNO’: Innovations; PIM: Planning, Implementation & Monitoring

29 Results Tracking financial resources for primary health care in BIHAR, India

Figure 19: NHM MFP line item budget shares and utilization rates

NHM Flexipool budget and utilization of subcomponents 25,000

20,000

15,000

10,000

5,000

- ASHA Untied Fund Civil Hospital Mobile Medical Planning, strengthening Units Implementation & Monitoring

Budget as a share of MFP budget Budget Utilization

Specifically reasons for underutilization can be attributed to absence of systems capacity and an apparent lack of accountability within the governance structures and can be captured in the five reasons mentioned below:

. Sub-optimal systems for procurement and supply chain

. Lack of contracts design and management capacity

. Lack of proactive monitoring

. Lack of accountability within the governance structures at different levels

. Inability to recruit and retain the required human resources for health

We present below specific areas of underutilization based on content analysis of different monitoring and audit reports of the state and the central government.

Delays in civil works: Only 5 out of 298 construction works could be completed till March 2015, 35 are incomplete and 258 projects were yet to start despite the SHSB transferring Rs 4,461 million to the Bihar Medical Services and Infrastructure Corporation (BMSIC) between April 2011 and February 2014. The BMSIC was set up in 2010 as an independent corporation with the aim of streamlining procurement and supply of drugs. It was also entrusted with the responsibility of civil works, to expedite and bring about efficiency to the tardy pace of progress under the Public Works Department (as per 7th CRM report Public Works Department could complete only 29 percent of the work assigned to it). The utilization of budget allocated for new construction/renovation was merely 39 percent in 2011- 12, plummeted to 7 percent in 2012-13 and remained at the same level in 2013-14. Lack of foresight and planning is evident as BMSIC was a new institution without the systems, structures, and district level reach that the Public Works Department has with its cadre of engineers and staff in each of the districts. A small infrastructure cell within the Corporation does not have adequate capacity to transform the way civil work projects were implemented in the health sector.

30 Results Tracking financial resources for primary health care in BIHAR, India

The impact of delays and inefficiencies in civil works experienced by the beneficiaries are gleaned from findings from FGDs with women and discussions with ASHAs. The lack of adequate numbers and appropriate types of facilities often cause over-crowding, long delays, and decline in the quality of care. Discussions also reveal that while in most cases the PHC owns its own building, often in a dilapidated state. It is not connected with all-weather roads, making it difficult to reach PHC in remote regions. In some, make-shift structures have been erected which are used as a waiting room, and most lacked drinking water or fans. In short, the adequate physical infrastructure of most PHCs is sorely lacking.

The success of the ASHA workers and Aganwadi workers has increased demand on an already strained (physical) delivery system. There is an enhanced awareness among the community about its medical and health care entitlements. The Information Education Communication (IEC) measures, mobilization efforts through home visits and the holding of health events on a regular basis have helped to improve awareness. Finally, qualitative discussions with the community members also allude to unmet demand noting that if adequate number of health facilities were available, then the population would likely seek more health services.

Access to medicines: Procurement and supply chain systems for ensuring availability of drugs continue to remain one of the major challenges in spite of the formation of the BMSIC. Five years since its establishment, it still lacks the systems and the capacity to fulfill its mission. Absence of accountability mechanisms and processes and systems within the new structure resulted in problems that had already saddled the drug procurement system earlier. Delays in supply of drugs were widespread and audit reports reveal delays up to 418 days in Madhubani district, 337 days in Gaya district, 168 days in East Champaran and 165 days in Kishanganj. There were instances of drugs being purchased at higher prices than the negotiated rate contract finalized by the SHSB for those medicines even while the tenure of those rate contracts remained valid and applicable. All of these irregularities led to the inevitable outbreak of a scam in the middle of 2013-14 resulting in destabilization of the Corporation and large scale suspension of officers.

ASHA payments and JSY incentives to beneficiaries

Reports indicate substantial delays in releasing ASHA payments and JSY incentives to beneficiaries ranging from one month to a year. A Comptroller and Auditor General (CAG) audit team in November 2013 found more than 600 beneficiary checks lying undelivered from the previous year (September 2012). Reasons for delays include delays in receipt of funds because many ASHA’s did not have bank accounts. Beneficiaries have to make repeated visits and contacts for receiving their payment (UNFPA, 2009). While the possibilities of fraud have been minimized by the use of e-payments or checks, delays in release of payments continue to be widespread. Responses from FGDs with women and discussions with ASHAs further validate these observations.

Inadequate efforts for convergence especially at the grassroots level, lack of active involvement of Panchayati Raj Institutions; limited knowledge about the roles of Village Health, Sanitation and Nutrition Committees and its members or what to use the untied funds for; irregular committee meetings (once a year in general) have contributed to underutilization of untied funds for these Committees. Discussions at the village level further substantiate these reasons. Some of the observations from the discussions / FGDs are:

. No committee member, except the ANM, knew the extent and type of fund utilization.

. In one case, the members contributed Rs 20 each to get chairs for the meeting.

. In another PHC area, the VHSNC members stated that the fund account is jointly operated by the ANM and the Mukhiya (Village Head) and no other member has any say in the expenditure.

. During discussions it was found that the meetings are not organized with the constituted committee for planning the activities.

31 Results Tracking financial resources for primary health care in BIHAR, India

. Only the Mukhiya utilizes the fund at her/his discretion. In response to this, the Mukhiya clarified that as the fund allocated was “very little” to meet the existing demand, activities under VHSNC were ignored.

. According to the Medical Officer of a PHC, now VHSNCs have started spending the untied fund, but quality spending by consensus needs improvement.

Vacancies in staff positions, non-procurement of required kits for ASHAs, establishment of only one of the 34 assigned Special New Born Care Units between August 2011 and April 2015, organizing only 21 percent of the camps under the School Health Program and therefore reaching only 13 percent children of the planned target in 2010-11 are few more examples of weak planning, management, implementation and monitoring capacity.

The current arrangement under NHM makes the funds flow to project-specific accounts at district and facility level (called PL accounts). According to a senior state official responsible for NHM and treasury finances this reduces the flexibility that the NHM/Society route originally envisaged. The State government is aware of the problem and decision is being made to do away with PL accounts and combine all NHM funds in a single bank account. When administrators and managers across state, district and facility level focus primarily on expenditure (to spend the money) and not on outputs and outcomes, problems such as equipment purchased but lying uninstalled, immunization sessions held in villages but cold chain and vaccine efficacy not necessarily ensured; and more kits procured than the number of ASHAs deployed and trained, are more likely to occur.

Poor fund utilization capacity worsens program performance. When asked whether the government is able to reach out to the most vulnerable communities, during the FGDs with women SHG members and ASHAs there was a mixed response. While a majority of them felt that things have marginally improved from the past, a little less than half strongly felt that state programs have still not been able to reach out to the poorest of the poor. However, the higher- level functionaries perceive that there has been marked change towards providing services to the marginalized.

32 Results Tracking financial resources for primary health care in BIHAR, India

6. Conclusion

Bihar continues to be one of India’s poorest states, and its health indicators are close to the bottom of all states. Despite a rapid expansion of the economy, health spending remains low and has not kept up with the growth in GSDP. Although it doubled, the health budget as a share of GSDP has declined in the last two years. The per capita TGHE remains one of the lowest in the country at Rs. 339. Following the 14th Finance Commission recommendation, which puts greater focus on states to set their own priorities, allocation to social sectors in Bihar has declined from 49 to 42 percent of its total state budget. A Parliamentary Committee in May 2016 expressed concern over this move to give states more autonomy in health spending by increasing their share of the tax pool, which appears to have had some unintended effects in the first year such as more bureaucratic delays in the allocation of funds.

As an EAG state, Bihar depends heavily on central allocations for health through NHM. The center’s contribution to TGHE increased 4 times, whereas the state’s own contribution grew only by 1.7 percent, and the pace of the state’s spending on health is slowing down. The per capita government spending on pharmaceutical expenditure is Rs 19, again one of the lowest in the country, and resulting in high out of pocket expenditures for basic medicines. The BMSIC is fraught with organizational and capacity problems and is yet to fully implement electronic record keeping, limiting the ability to accurately forecast and distribute pharmaceuticals and medical supplies causing drug stock outs in the public system.

Primary care as a share of TGHE has ranged between 65 to 74 percent during the study years, but in recent years has experienced a gradual decline. The per capita government primary care expenditure is Rs. 222. This decline can be partially attributed to slowing down of state’s own spending on health. With over 60 percent of its budget on human resources, slowing of its contribution to health is likely to have a direct impact on the already beleaguered human resources component of the health system. The health system is also impaired with large shortages in human resources, particularly physicians and nurses, which in fact contributes to lower utilization in the treasury budget, where new positions are budgeted for but yet to be filled.

Timely and effective budget utilization continues to be a concern, particularly of the NHM budget. The NHM budget utilization remains low even after a decade of NHM implementation. NHM fund flows continue to be made through project specific PL accounts at the district and facility level which effectively reduces the flexibility of how to use the funds. The focus of the management is thus concentrated on spending the budget rather than its effectiveness or the outputs/outcomes of that spending. For example, equipment is purchased but lies uninstalled; more ASHA kits procured than number of ASHA’s trained or deployed. It is obvious that low utilization negatively impacts program performance.

The organizational and political challenges, including lack of leadership at the local (village) level impede the successful implementation of NHM in Bihar. Two other factors impinge on the success of NHM: fragmented and partially devolved governance structures where the PRIs are often not empowered with real devolution of power; and rigid budgeting practices. As a result, the resource allocation under the Mission Flexi Pool that should have spurred local innovative responses remains the least utilized pool of resources. A third of the NHM budget is allocated to the Mission Flexi Pool, however, only half of it is expended. Within the NHM Fexi Pool there were further specific areas of underutilization: human resources, including ASHAs; procurement of drugs and pharmaceuticals; and civil construction.

Public financial management factors; organizational and governance factors; and leadership and implementation capacity all constrain effective use of the more flexible components of NHM. Our study results indicate that while Bihar certainly needs to raise and spend more for health to attain basic levels of health system capacity, it also needs to develop its ability to spend money more effectively. Both of these elements need to be developed concurrently in support of more rapid progress.

33 Conclusion Tracking financial resources for primary health care in BIHAR, India

7. Policy Implication and Recommendations

Bihar’s health financing systems have yet to show the potential to significantly overcome the poor health outcomes, lack of financial risk protection, and health inequities in the state. Significant policy and political commitment is needed for a real change in how health care is financed and administered in Bihar. Two fundamental questions emerge: a. How to mobilize additional health funds in Bihar? In light of slowing of center and state investment in health, and more importantly the 14th Finance Commission recommendation where states have more discretion, we already see a dip in budget allocation to social sectors in the first year in Bihar. How then to advocate for more funds for health in such a scenario, and what messages will resonate with the state to prioritize health? Improving the current budget utilization, better accountability, better health outcomes is the first step toward generating evidence for advocating for more funds. Demonstrating a link between resource use and health care outputs and outcomes resulting from improvement can help support the case for more funding. b. What systemic changes are warranted to improve the effectiveness of the health resources – particularly under NHM? In states like Bihar, which is impaired with low organizational and leadership capacity, or community engagement, how can centrally sponsored scheme like NHM, whose success hinges on local response, leadership, and innovation, be made more effective? What systems and processes should be put in place to improve its budget utilization?

A few recommendations as a starting point are highlighted below:

Recognizing that prioritizing health is as much a political process as an economic one, can incentive grants from the center for expanding the revenue base be considered for Bihar, with the condition that the additional revenue be invested in health? While efforts to mobilize additional funds are being conceived, significant efforts to reduce the gap between budgets and expenditures and accelerate ability to use flexible funds will produce better health outcomes for the same resources – which will make a compelling argument for advocacy.

For improved and realistic planning developing a financial plan such as the Medium Term Expenditure Framework (MTEF) should be considered, especially taking into account the large back-log of civil projects and recurrent costs. A robust MTEF can help plan a better expenditure composition in favor of health, while protecting other priority sectors against cuts. It can also guide in monitoring that budget allocations translate into actual expenditures and thereby improve the credibility of the budgeting process.

Amidst the Prime Minister’s ‘Digital India’ push to increase the use of electronic record keeping ranging from e-payments to ASHAs, web-based portals for monitoring bidding processes for drugs and capital projects to digitizing records at the facility will increase transparency and accountability. Lack or limited oversight and monitoring has persistently undermined the system in Bihar. IT-enabled services and real time monitoring of services and finances will create a continuous and credible digital record of healthcare data, generated at the village level, and be available to managers and decision makers in real time. Such electronic platforms would allow them to not only monitor progress but also to make informed program implementation-related decisions and provide supportive supervision for increasing reach, quality and timeliness of healthcare services. Another important measure would be to explore alternatives to project based PL accounts that enforce budget rigidities and stifle any discretion.

The SHSB needs to do a better job and proactively engage with the communities to enhance social mobilization involving PRIs, civil society, public health institutions and other stakeholders. Build capacity of local leaders and truly empower them to actively participate in finding local solutions to improve the convergence of the social determinants of health and the public health system to enhance outcomes. Improve dissemination of expenditure guidelines and enhance the knowledge of local managers associated with use of the Flexipool funds. When local leaders are empowered and have the right knowledge, effective use of the discretionary funds can be made possible. This is the first time such discretionary pools have been made available.

34 Policy Implication and Recommendations Tracking financial resources for primary health care in BIHAR, India

Invest in revamping the BMSIC for improved procurement and supply chain system, and civil works. Its organizational and governance structure and personnel capacity can be improved by replicating successful lessons from states like Tamil Nadu, Kerala, or Rajasthan. Their entire systems are electronic that facilitate transparency, accountability, timeliness, and most importantly mid-course correction.

Establish a research cell within the department of health to carry out operational research, which can feed into strategic, and evidence based planning.

Finally, efforts to develop technical capacities in Bihar’s governmental structures for health have focused on below- district level personnel and processes. The upstream capacities are also critical for better performance. These also will need investment and innovative approaches to improve performance.

35 Policy Implication and Recommendations Tracking financial resources for primary health care in BIHAR, India

Annex 1: Data sources

1. Bihar Economic Survey 2015-16

2. GSDP data from Ministry of Statistics and Plan Implementation, Government of India: http://mospi.nic.in/ Mospi_New/upload/SDPmain_04-05.htm

3. State budget documents, 2007-08 to 2013-14

4. CAG Audit Reports, 2011-12 to 2013-14

5. State Health Society Bihar Audit Reports, 2005-06 to 2013-14

6. NHM FMRs

7. NRHM HMIS, GoI

8. Annual Health Survey Bulletin, 2010-11, 2011-12, 2012-13, Registrar General of India

9. Rapid Household Surveys, GoI

10. State Finances: A Study of Budgets (https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=State%20 Finances%20:%20A%20Study%20of%20Budgets)

36 Annex 1: Data sources Tracking financial resources for primary health care in BIHAR, India

Annex 2: District Expenditure Analysis Total government health expenditure

TGHE in the sampled districts in Bihar is presented in Table 2A below.

Table 2A: TGHE in study districts in Bihar

Districts 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Bhagalpur 8 5 8 .31 9 0 6.74 1 , 1 15.62 1 , 2 78.66 1 , 5 05.64 1 , 5 01.72 Darbhanga 9 5 3.67 1 , 1 72.58 1 , 3 87.32 1 , 4 99.17 1 , 7 68.22 1 , 8 79.40 East Champaran 4 8 3 .06 5 9 0.90 6 9 1 .59 9 9 8.86 1 , 0 59.55 1 , 0 83.48 Kishanganj 1 9 2 .14 2 6 8.35 2 5 9 .68 2 8 2 .81 3 4 1 .95 3 5 7 .76 Sheohar 5 5 . 3 9 1 2 1 .51 1 1 9 . 84 1 6 0 .32 1 6 1 .66 1 6 8 .06

Whereas NHM constitutes substantial share of TGHE in East Champaran, Kishanganj and Sheohar, its share in TGHE is relatively far less in Bhagalpur and Darbhanga. See Table 2B below.

Table2B: NHM as a share of TGHE in study districts in Bihar

Districts 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Bhagalpur 36.05% 29.77% 22.70% 29.25% 32.19% 25.08% Darbhanga 14.97% 21.53% 16.97% 17.77% 17.65% 16.71% East Champaran 32.00% 40.05% 32.64% 52.74% 43.96% 46.52% Kishanganj 41.10% 50.06% 46.76% 43.91% 46.75% 46.61% Sheohar 34.09% 53.81% 44.37% 50.78% 50.33% 52.59%

Health Expenditure Growth Rates

An analysis of TGHE growth rates do not provide any evidence of structured planning of health expenditure even at the district level.

Table2C: Year-on-year growth rate in TGHE (adjusted at 2004-05 prices)

Districts 2010-11 2011-12 2012-13 2013-14 2014-15 Bhagalpur -3% 14% 5% 10% -7% Darbhanga 13% 9% -1% 10% -1% East Champaran 13% 8% 32% -1% -4% Kishanganj 29% -11% 0% 13% -2% Sheohar 102% -9% 23% -6% -3%

The real growth rates (adjusted at 2004-05 prices) has declined in all the five districts in 2014-15 as compared to 2013-14. Comparing 2009-10 expenditure figures with the expenditure in 2014-15, in real terms we see that in the last five years, the real growth in TGHE is the lowest at 19% in Bhagalpur and the highest at 106% in Sheohar. NHM expenditure in Bhagalpur in 2014-15 is 17% less than what it was in 2009-10 in real terms. See Figure 2A.

37 Annex 2: District Expenditure Analysis Tracking financial resources for primary health care in BIHAR, India

Figure 2A: Real growth in TGHE in Bihar study districts between 2009-10 & 2014-15

Real Growth in Total Government Health Expenditure between 2009-10 & 2014-15

218%

121% 106%

52% 39% 48% 49% 43% 31% 34% 26% 20% 15% 19%

Under Treasury Under NHM TGHE -17%

Bhagalpur Darbhanga East Champaran Kishanganj Sheohar

Expenditure on primary healthcare

Share of expenditure on primary care is relatively far less in Bhagalpur and Darbhanga, than in the remaining study districts. During 2009-10 and 2014-15, the aggregate investment in primary care is the lowest at 41% of the total government health expenditure in Darbhanga and highest at 90% in East Champaran. See Table 2D:

Table 2D: Primary care as a share of TGHE in study districts in Bihar

2009-2015 Districts 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 (Mean) Bhagalpur 62% 58% 55% 60% 59% 55% 58% Darbhanga 36% 41% 41% 40% 51% 38% 41% East Champaran 88% 89% 89% 92% 90% 90% 90% Kishanganj 88% 89% 89% 88% 86% 85% 88% Sheohar 86% 87% 85% 85% 84% 84% 85%

With 94% rural population and no secondary level facility above CHC apart from a District Hospital, the high share of primary care expenditure in East Champaran is understandable.

NHM expenditure has provided a reasonable boost to the primary care expenditure at district level in the state. In terms of percentage points we see that over the six years (2009-2014), Bhagalpur has had the maximum impact of NHM (increase by 17 percentage points), followed by Sheohar (14 percentage points), Darbhanga (13 percentage points), Kishanganj (10 percentage points) and finally East Champaran (7 percentage points) in terms of primary care expenditure as a share of TGHE in the district. See Figure 2B below:

38 Annex 2: District Expenditure Analysis Tracking financial resources for primary health care in BIHAR, India

Figure 2B: Impact of NHM on primary care expenditure levels in Bihar study districts

Primary Care Expenditure (PCE) as a share of TGHE Impact of NHM at the District level in Bihar Mean (2009-10 to 2014-15)

90% 87% 83% 85% 77% 71%

58%

41% 42% 29%

Bhagalpur Darbhanga East Champaran Kishanganj Sheohar

Share of PCE (Treasury only) Share of PCE in TGHE (incl. NHM)

39 Annex 2: District Expenditure Analysis Tracking financial resources for primary health care in BIHAR, India

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