Govt likely to set up Pradhan Mantri health fund in upcoming Budget

Centre, states to contribute to meet higher public spending target

Amid an overwhelming demand for a higher health care allocation, the government may set up a new fund to meet the public health spending target of 2.5 per cent of gross domestic product (GDP) by 2025. Both, the Centre and states would provide for the fund to achieve the goal, the Union Budget may propose.

At present, the country’s total health expenditure is 1.4 per cent of GDP — much lower than many emerging economies in the world.

The fund, if created, would be under the ‘Pradhan Mantri’ umbrella and will focus on both short- and long-term priorities of the sector, said two government officials in the know.

According to them, the primary objective of the new fund will be to spend 25 per cent on primary health care and the rest on infrastructure as well as research and development. It would also provide additional money to the government’s existing health care schemes such as Ayushman Bharat.

The fund structure and outlay could be part of the upcoming Budget of 2021-22, scheduled to be presented on February 1, according to a source. The proposal, prepared by the health ministry, recently came up for discussion at the finance ministry.

Although the details are not known, sources indicated that a 4 per cent health and education cess on personal income and corporate tax could go to the new health care fund. Further, this fund would have no restriction on its spending in a particular fiscal year as it will be a part of the public fund which won’t lapse if not spent in a given time period.

This cess was introduced in Union Budget 2018 by then finance minister Arun Jaitley.

Increasing health care spending has been a talking point since 2017, after the National Health Policy (NHP) recommended spending at least two thirds of the government’s health expenditure on primary health care, in addition to setting a target to reduce the proportion of households facing catastrophic health expenditure by 25 per cent, from the current levels by 2025. However, Covid-19 has brought the issue centre stage.

According to the Economic Survey of 2020, the spend on health care as a percentage of total expenditure was reported at 5.3 per cent in the last two fiscal years. While the overall budget allocation for the Department of Health and Family Welfare surged from Rs 53,113.5 crore in 2017-18 to Rs 67,111.8 crore in 2020-21 (FY21), the expenditure budget for research rose from Rs 1,732 crore in 2017-18 to only Rs 2,100 crore in FY21.

According to the NHP estimates of 2017, primary health care accounts for 52.1 per cent of India’s current public expenditure on health. The policy had recommended that state governments should spend more than 8 per cent of their budget on the health sector by 2020.