India - New directions in health sector development at the state level : an operational perspective

Report No. 15753-IN India New Directions in Health Sector Development at the State Level: An Operational Perspective February 11, 1997 Population ancl Human Resources Division South Asia Country Department II (Bhutan, India, Nepal) u Document of the World Bank  CURRENCY Rs/ US$ Currency Official Unified Market' Prior to June 1966 4.76 June 6, 1966 to mid-December 1971 7.50 Mid-December 1971 to end-June 1972 7.28 1971-72 7.44 1972-73 7.71 1973-74 7.79 1974-75 7.98 1975-76 8.65 1976-77 8.94 1977-78 8.56 1978-79 8.21 1979-80 8.08 1980-81 7.89 1981-82 8.93 1982-83 9.63 1983-84 10.31 1984-85 11.89 1985-86 12.24 1986-87 12.79 1987-88 12.97 1988-89 14.48 1989-90 16.66 1990-91 17.95 1991-92 24.52 1992-93 26.41 30.65 1993-94 31.36 1994-95 31.40 1995-96 33.46 April 1996 34.24 May 1996 34.99 June 1996 34.99 July 1996 35.52 Aug 1996 35.69 Sep 1996 35.73 Oct 1996 35.64 Nov 1996 35.74 Dec 1996 35.84 Note: The Indian fiscal year runs from April 1 through March 31. Source: IMF, International Finance Statistics (IFS), line "rr'; Reserve Bank of India. A dual exchange rate system was created in March 1992, with a free market for about 60 percent of foreign exchange transactions. The exchange rate was reunified at the beginning of March 1993 at the free market rate. Vice President Mieko Nishimizu Directors : Robert S. Drysdale, Edwin Limi Division Chief/Manager Richard Skolnik Staff Member Tawhid Nawaz, Senior Economist  ABBREVIATIONS AND ACRONYMS AlIMS All India Institute of Medical Sciences ANM Auxiliary Nurse Midwife AP Andhra Pradesh APVVP Andhra Pradesh Vaidya Vidhana Parishad ASCI Administrative Staff College of India BDO Block Development Officer BOD Burden of Disease CAS Country Assistance Strategy CGHS Central Government Health Scheme CHC Community Health Center CPA Consumer Protection Act DALY Disability Adjusted Life Year DMO District Medical Officer DOHFW Department of Health and Family Welfare DPT Diphtheria, Pertusis and Tetanus DRDA District Rural Development Agency ESIS Employees State Insurance Scheme GDP Gross Domestic Product GFD Gross Fiscal Deficit GOI Government of India IAS Indian Administrative Service IEC Information, Education and Communication IMA Indian Medical Association JRY Jowahar Rojgar Yojana KFW Kreditanstalt Fuer Wideraufbau MCH Maternal and Child Health MNP Minimum Needs Program MOHFW Ministry of Health and Family Welfare NGO Non-governmental Organization NHP National Health Policy NMNP National Minimum Need Program NSS National Sample Survey ODA Overseas Development Authority OPD Outpatient Department ORG Operations Research Group PDS Public Distribution System PHC Primary Health Center PHU Primary Health Unit PRIs Panchayati Raj Institutions SC Scheduled Caste SDP State Domestic Product ST Scheduled Tribe UIIP Universal Immunization Program WB West Bengal WDR World Development Report WHO World Health Organization ZP Zilla Parishad  I  ACKNOWLEDGEMENTS This report has been prepared by Tawhid Nawaz (Team Leader and Senior Economist), with major contributions from Shreelata-Rao-Seshadri (Social Scientist), Keith Hinchliffe (Senior Economist) and Salim Habayeb (Senior Public Health Physician). Mark Schlagel and Rani Tudor were part of the team that contributed to the report. Background studies on the burden of disease and cost-effectiveness of health interventions, private sector and beneficiaries, and the panchayati raj institutions were undertaken by the following institutions and individuals: the Administrative Staff College of India (Hyderabad); Operations Research Group (Calcutta); Professor D.B. Gupta, the Delhi Institute of Economic Growth; and S. Basu, the Foundation for Research and Development for Underprivileged Groups. The peer reviewers include D. Jamison, H. Saxenian and P. Berman. The report benefited from comments from Roberto Zagha, Prabhat Jha, Anthony Measham and Fahrettin Yagci. The report is endorsed by Richard Skolnik, Chief, Population and Human Resources Division and Robert S. Drysdale, Director, South Asia Country Department II (Bhutan, India and Nepal) and was greatly facilitated by Heinz Vergin, who was the previous Department Director. The extensive collaboration of the Ministry of Health and Family Welfare (MOHFW) Government of India, and the Departments of Health and Family Welfare of Andhra Pradesh, Karnataka, Punjab and West Bengal is gratefully acknowledged. Special thanks go to Mrs. Shailaja Chandra, Additional Secretary, MOHFW, for her collaboration and support. The preparation of the report benefited from workshops held in Jaipur (February 1995), Simla (June 1995) and Pune (October 1995). The Green Cover version of the report was discussed with MOHFW and state health officials in Goa during November 12-14, 1996 at a Health Strategy workshop jointly organized by MOHFW and the World Bank, and comments received have been incorporated into the present version of the report.   INDIA: ECONOMIC DEVELOPMENT DATA GNP Per Capita (US$, 1994-95): 310 a Gross Domestic Product (1994-95) Annual Growth Rate (% p.a., constant prices) % of 70-71- 75-76- 80-81- 85-86- 92-93- 93-94- US$ Bln GDP 75-76 80-81 85-86 90-91 93-94 94-95 GDP at Factor Cost 272.0 90.3 3.4 4.2 5.4 5.9 5.0 6.3 GDP at Market Prices 301.2 100.0 3.3 4.2 5.6 6.2 3.9 6.3 Gross Domestic Investment 69.7 23.2 5.3 3.7 5.7 9.5 -5.8 19.8 Gross National Saving 67.0 22.3 4.4 2.6 3.5 8.7 -1.1 17.2 Current Account Balance -2.7 -0.9 -- -- -- -- - - Output, Employment and Productivity (1990-91) Value Added Labor Force b V. A. per Worker US$ Bin. % of Tot Mill. % of Tot. US$ % of Avg. Agriculture 82.5 31.0 186.2 66.8 443 46.4 Industry 78.0 29.3 35.5 12.7 2195 230.0 Services 105.7 39.7 57.2 20.5 1849 193.7 Total/ Average 266.2 100.0 278.9 100.0 954 100.0 Government Finance General Govermnent c Central Government Rs. Bln. % of GDP Rs. Bln. % of GDP 1994-95 1994-95 90-91-94-95 1994-95 1994-95 90-91-94-95 Revenue Receipts 1809.0 19.1 19.5 910.8 9.6 10.1 Revenue Expenditures 2219.0 23.5 23.5 1221.1 12.9 13.3 Revenue Surplusl Deficit (-) 409.9 4.3 4.0 -310.3 -3.3 -3.2 Capital Expenditures d 337.9 3.6 4.3 266.8 2.8 3.5 ExternalAssistance(net) ' 51.5 0.5 0.7 51.5 0.5 0.7 Money, Credit, and Prices 89-90 90-91 91-92 92-93 93-94 94-95 95-96p (Rs. billion outstanding, end of period) Money and Quasi Money 2309.5 2658.3 3170.5 3668.3 4344.1 5308.0 6005.0 BankCredittoGovernuent(net) 1171.5 1401.9 1582.6 1762.4 2039.2 2224.2 2626.7 Bank Credit to Commercial Sector 1517.0 1717.7 1879.9 2201.4 2377.7 2896.6 3386.4 (percentage or index numbers) Money and Quasi Money as % of GDP 50.6 49.6 51.4 52.0 54.2 56.1 55.4 Wholesale Price Index (1981-82 = 100) 165.7 182.7 207.8 228.7 247.8 274.7 295.8 Annual Percentage Changes in: Wholesale Price Index 7.4 10.3 13.7 10.1 8.4 10.9 7.7 BankCredittoGovermnent(net) 20.3 19.7 12.9 11.4 15.7 9.1 18.1 BankCredittoCornmercialSector 14.4 13.2 9.4 17.1 8.0 21.8 16.9 a. The per capita GNP estimate is at market prices, using World Bank Atlas methodology. Other conversions to dollars in this table are at the prevailing average exchange rate for the period covered. b. Total Labor Force from 1991 Census. Excludes data for Assam and Jammu & Kashmir. c. Transfers between Centre and States have been netted out. d. All loans and advances to third parties have been netted out. e. As recorded in the government budget.  Balance of Payments (USS Millions) 1993-94 1994-95 1995-96p Merchandise Exports (Average 1990-91-1995-96) Exports of Goods & NFS 27,947 32,760 39,682 Merchandise, fob 22,683 26,857 32,789 US$ MNi % of Tot. ImportsofGoods&NFS 29,798 38,150 48,536 Merchandise, cif 25,069 31,840 41,582 Tea 404 1.8 of which Crude Petroleum 3,468 3,428 3,672 Iron Ore 487 2.2 of which Petroleum Products 2,285 2,500 4,046 Chemicals 1,824 8.1 Trade Balance -2,386 -4,983 -8,793 Leather & Leather products 1,439 6.4 Non Factor Service (net) 535 -407 -61 Textiles 2,698 12.0 Garnents 2,731 12.1 Resource Balance -1,851 -5,390 -8,854 Gems and Jewelry 3,753 16.7 Engineering Goods 2,754 12.2 Net factor Incomea -3,929 -4,119 -4,455 Others 6,415 28.5 Net Transfersb 3,825 6,200 7,478 Total 22,506 100.0 Balance on Current Account -1,955 -3,309 -5,831 External Debt, March 31, 1996 Foreign Investment 4,235 4,895 4,347 US$ Mill. Official Grants and Aid 368 472 335 Public & Publicly Guaranteed 79,655 Net Medium & Long Term Capital 3,280 1,124 1,124 Private Non-Guaranteed 6,618 Gross Disbursements 7,307 5,953 5,953 Total (Including IMF and Short Term) 93,697 Principal Repayments 4,027 4,829 4,829 Debt Service Ratio for 1995-96 Other Capital Flows' 1,670 2,828 -3,180 Non-Resident Deposits 940 847 1,365 % curr receipts Net Transactions with IMF 190 -1,174 -1,719 Public & Publicly Guaranteed 20.9 Private Non-Guaranteed 1.4 Overall Balance 8,538 6,857 -1,840 Total (Including IMF and Short Term) 27.1 Change in Net Reserves -8,537 -6,858 2,005 IBRD/ IDA Lending, March 31, 1996 (US$ Mill) Gross Reserves (end of year)d 15,476 21,160 17,436 IBRD IDA Rate of Exchange Outstanding and Disbursed 9,849 17,499 JUndisbursed 4,122 4,583 End-March 1996' US$ 1.00 = Rs. 34.45 Outstanding incl. Undisb. 13,971 22,082 - Not available. a. Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to IMF, and major receipts is interest earned on foreign assets. b. Figures given include workers' remittances but exclude official grant assistance which is included within official loans and grants, and non-resident deposits which are shown separately. c. Includes short-team net capital inflow, changes in reserve valuation and other items. d. Excluding gold. e. The exchange rate was reunified at the market rate in March 1993. f Total exports (commerce); net of crude petroleum exports.  India Me& Same .&aSfl5Ssmar Now Latet aiffkyea recen ks Uni .1eduae Sit a- ue indte _me 197(75 19804.5 109899 Al Incs prew Prority Povery Indicators POVERTY Uer povey line local cwr. .. .. .. Headcount index % of pop. .. .. .. Lowe povety local cun. ..... Headcount index % of pop. .. .. .. GNPperc pita US$ 180 280 310 320 390 1,670 SHORT TERM INCOME INDICATORS Unskilled uen wage local cur. .. Uknskled url wages Rural tems of trde .8 94 Consumer price indtex 1987-100 45 85 189 Lower income Fooc? 27 83 176 Urban *3 176 Rural SOCLIL INDICATORS Public expenditure on basic social ervices % of GDP .. .. .. Gros enrollment rtios Primay % hool age pop. 79 96 102 98 105 104 Male 94 110 113 110 112 105 Female 62 80 91 87 98 101 Mouity infantmodality per thou. ive birtha 132 108 70 73 58 36 Under 5 nortality .. .. 97 106 101 47 Immnnization measles % age group .. .. 85.8 84.2 86.2 77.4 DPr' .. 41.0 90.2 88.6 89.1 82.0 Child nulnutrition (under-5) .. .. 63.0 61.5 38.2 Life expectancy Total years 50 55 62 61 63 67 Femle advantage -1.9 -0.4 1.3 1.2 2.4 6.4 Totl ferity rte births per woman 5.6 4.8 3.3 3.6 3.3 2.7 Matemal mortality rate per 100.000 live births .. 460 437 Supplementary Poverty Indicators Expenditures on social security % of total govt exp. .. .. .. Socidal security coveage % econ. ctive pop. .. .. .. Acces to sfe waer total % of pop. 31.0 56.3 .. Urban 80.0 76.0 .. Rural 18.0 50.0 .. Acceu to health care .. 75.0 .. Population growth rate GNP per capita growth rate Development diamondb (average annual, percent) loS (averge annual. percent) Life expecancy 4 5 ____________________ _ , GNP Gross 2 1 0 per primary 0- _ + l I l l -5 - . e Capita enrlren -2-1 1970-75 198045 1989-94 1970-75 - 198085 1989-94 Access to ufe waer r- India _ India - Low-income - Low-income a See te tdmical not, p.387. b. The devdopmnnt diamond, baed on four key indicato the averge level of development in the country compared with it income group. See the inutoduction.  India L~ftetC kywa reet h6' Uni of Win"ag Seush L*W- IeMe lindiate mean"r 19f79.7 19.894 Ing-" Aska 6:0ilce grew Resources and Expenditures HUMAN RESOURCES Populdon (mrem-1994) thousnds 613,459 765,147 913,600 1,220.285 3,182,221 1,09688 Age dqpenkncy raio rtio 0.77 0.72 0.66 0.71 0.66 OJ3 Urban * of pop. 21.3 24.3 26.5 26.0 283 55.9 Populion growth mse anual * 2.3 2.0 1.7 1.8 1.7 13 Urban 3.7 3.0 2.7 3.1 3.2 2.7 Labor force thousands 260.515 329,608 394,330 528,108 1.590,533 4818647 Agiculture * of labor force 70 67 64 63 67 36 Industry - 13 14 16 16 14 26 Female 31 32 32 32 39 40 Labor paticipaion rtes Total * of pop. 42 43 43 43 50 45 Femae 13 14 14 29 41 36 NATURAL RESOURCES Area tiou. sq. km 3,287.59 3,287.59 3,287.59 5,133.49 40,391.42 40,594.43 Dewity pop. per sq. km 186.60 232.74 273.21 233.41 77.44 2666 Agiculturalland %*ofl ndarea 60.83 60.86 60.89 59.11 52.42 41.05 Chane in riculturallnd annual V 0.47 -0.07 -0.05 -0.02 0.16 -138 Agiultr land under inrigaion V 18.65 23.09 25.96 29.63 17.84 11.40 Forests and woodland thou. sq. km .. 551.19 517.29 658.32 7.632.00 5,969.25 Deforestation (net) chage, 1980-90 .. .. 0.63 INCOME Household income Shae of top 20* of househods * of income 49 41 43 Shae of bottom 40% of houshols 16 20 21 Sha of bouom 20% of housebolds * 6 8 8 EXPENDITURE Food * of GDP 43.6 35.3 .. Staples 20.6 12.4 .. Meat, fish, milk, cbeese, oW 6.5 7.4 .. Ceal imports tou. meter tones 7,669 205 694 6,211 36,922 68,936 Foodaidincereals 1,582 304 276 1,624 8,516 5,771 Foodproductionper capta 1987- 100 94 104 115 113 115 102 Ferdlizer comumpdio kglba 19.3 47.0 67.5 69.7 58.5 46.3 Share of agiculture in GDP * of GDP 36.6 29.5 26.9 26.6 27.6 14.0 Eousing *dof GDP 4.4 7.1 .. Averge hsehd size pe s per household 5.2 5.6 .. Urbn 4.8 5.5 .. Fixed invesct huing V of GDP 2.3 2.8 .. Fu- ad power * of GDP 2.4 2.3 .. BMWyconrumptionp rClpit kgofoilequiv. 124 170 243 219 373 1,602 Housebold with deccidty Urban * of households .. .. .. Rura . T port ad commslmhmm V of GDP 4.7 5.1 .. Fixed investmt transport equipment 1.4 2.3 .. .. .. Tota road legth thou. km 1,375 1,546 2,962 nViSTsw IN HUMAN CAPITAL Health Popuaion per phyican penor 4,900 2,522 .. .. .. 3.064 Population pernuNe * 3,710 1,701 .. Populationperhospitalbed 1,700 1,300 1,371 1,675 1,034 S92 Olrd rehydyntion therapy (undor-5) V of o .. .. 37 37 38 Edin Grou enrollment mtios Seondary * oftscoolagepop. 26 37 49 45 48 63 Femle 16 26 38 35 42 62 Pupil-cherrntio:pin ry pupils per tear 42 58 63 61 39 . Pupil-techer ratio: sconday 21 21 26 26 20 Pupils roachlgVads4 4o*cohort 51 58 .. Re_at rat: primry ftoalenrl 17 .. .. lliteracy * ofpop. (4r 15+) 66 56 48 51 35 Femle % of etm(aplSt+) 71 62 64 46 Nspapercrrcuation perdtu pop, 15 26 31 26 ..2 WorW Bnk IemnBal oommies Deatmoet, April 1996  INDIA NEW DIRECTIONS IN HEALTH SECTOR DEVELOPMENT AT THE STATE LEVEL: AN OPERATIONAL PERSPECTIVE Table of Contents Page No. Currency Abbreviations and Acronyns Acknowledgements Economic Development Data Executive Summary ........................ ................................................... v Table on Main Findings and Recommendations ........................................................ xvi CHAPTER ONE: INTRODUCTION A. Background ........................................................ 1 B. Purpose and Scope of the Study ......................................................... 1 C. Terms of Reference for the Study ........................................................ 2 D. Structure of the Report ........................................................ 3 CHAPTER TWO: CHALLENGES IN THE HEALTH SECTOR A. Sectoral Background ........................................................ 5 B. Looking to the Future: Challenges and Opportunities at the State Level ............. 5 CHAPTER THREE: BACKGROUND TO HEALTH POLICY AND PLANNING: DEMOGRAPHIC FEATURES, EPIDEMIOLOGY AND BURDEN OF DISEASE IN THE FOUR STATES A. Introduction. 9 B. The Health Transition .10 C. Epidemiology and the Evolving Burden of Disease in the Four States 11 D. Recommendations .18  ii CHAPTER FOUR: THE PRIVATE SECTOR IN HEALTH CARE AT THE STATE LEVEL A. Introduction ...................................................... 19 B. Scope of the Private Sector in Health Care Delivery ................................... 19 C. Services Offered by Private Sector ...................................................... 22 D. Public-Private Partnerships in the Health Sector ......................................... 24 E. Contracting Out ...................................................... 26 F. Quality of Services, Monitoring and Evaluation ......................................... 27 G. Recommendations ...................................................... 28 CHAPTER FIVE: CENTER-STATE FINANCING ISSUES IN THE HEALTH SECTOR A. Introduction ...................................................... 30 B. Center, State and Local Government Responsibilities in Health Financing ...... ... 30 C. Inter-State Equity Issues ...................................................... 34 D. Government Health Expenditures: All States ............................................ 35 E. Patterns of Health Expenditure Across States ............................................ 36 F. Mechanisms of Adjustment Effects on Center-State Transfers ........................ 37 G. Recommendations ...................................................... 40 CHAPTER SIX: PUBLIC SECTOR HEALTH EXPENDITURE IN THE FOUR STATES A. Introduction ...................................................... 41 B. State Finances ...................................................... 41 C. Trends in Expenditure in Health and Family Welfare .................................. 44 D. Per Capita Expenditures on Health ...................................................... 45 E. Effects of Fiscal Adjustment on Health Budgets ......................................... 45 F. Share of Budgetary Resources Devoted to Health ....................................... 46 G. Composition of Health Budgets ...................................................... 47 H. Future Trends in Public Sector Health Financing ....................................... 51 I. Recommendations ...................................................... 52 CHAPTER SEVEN: A SUPPLEMENTARY HEALTH FINANCING MECHANISM: USER CHARGES A. Introduction ...................................................... 54 B. User Charges: Operational Issues ...................................................... 54 C. User Charges: Existing Practices ...................................................... 56 D. Recommendations ...................................................... 57  iii CHAPTER EIGHT: THE COST EFFECTIVENESS OF HEALTH INTERVENTIONS A. Introduction ............................................... 59 B. Burden of Disease and Cost-Effectiveness Study ........................................ 59 C. Cost-Effectiveness Analysis ............................................... 60 D. Andhra Pradesh Burden of Disease and Cost-Effectiveness Study ......... .......... 60 E. Results ............................................... 64 F. Recommendations ............................................... 65 CHAPTER NINE: SPECIAL ISSUES IN MANAGEMENT ADMINISTRATION IN THE HEALTH SECTOR: DECENTRALIZED GOVERNANCE UNDER THE PANCHAYATI RAJ SYSTEM A. Introduction ............................................... 67 B. Rationale for Decentralization of Administration ........................................ 68 C. Three Models of Decentralization ............................................... 70 D. Key Linkage between State Health Administration and PRIs: District Level Organizational Structure of Health Administration .................................... 72 E. Role of PRIs in Health Delivery: Two Examples .................................... 74 F. Recommendations .................................... 76 Bibliography .79 ANNEXES 1. Decentralized Administration in the Health Sector ................................... 83 2. Cost Effectiveness of Services at First Referral Vs. Tertiary Level Hospital Care ........................... 108 3. Clinical and Diagnostic Service Norms ........................... 136 4. User Charges: Existing Practices in the Four States and Potential Revenue Generation ........................................... 182 TABLES 3.1 DALYs Estimated to be Lost During the Year 1992 .................................... 13 3.2 DALYs Lost per 1,000 Population ..................................... 14 3.3 DALYs Lost per 1,000 Population by Major Cause Groups in Rural & Urban Areas ............................... 14 3.4 Total DALYs Lost by Major Cause Groups ............................... 15 3.5 Percent of Total DALYs Lost by Major Cause Groups: 1990 and Projected for 2020 .18  iv 4.1 Distribution of Private and Voluntary Hospitals by Type of Ownership in Karnataka ........................................................ 21 4.2 Cost of Treatrnent for an Illness Episode in Nellore District (AP) in Rs . ........... 24 4.3 Comparison of the Cost of Treatment in Government and Private Hospitals ....... 24 4.4 National Health Spending: An Estimated "Source and Uses" Matrix ....... ........ 25 5.1 Center and State Shares in Different Components of the Government Health Budget ............................................ 33 5.2 Trends in Public Revenue Expenditures on Health 1988-1992 ........................ 37 6.1 Gross Fiscal Deficit as Proportion of State Domestic Product -- Project States 1990/91 -- 1993/94 .42 6.2 Revenue Deficit as Proportion of State Domestic Product -- Project States 1980/81-1993/94 ........................................................ 42 6.3 Expenditure on Health and Family Welfare as Percentage of SDP ................... 44 6.4 Per Capita Expenditures on Health and Family Welfare ........... ................... 45 6.5 Real Growth Rates in Health Expenditure -- Project States 1980/81-1993/94 ...... 46 6.6 Share of Health and Family Welfare Sector in Total State Revenue Budget ........ 46 6.7 West Bengal: Composition of the Health Budget ................. ...................... 47 6.8 West Bengal: Composition of Spending in Hospitals and Dispensaries -- 1992/93 -- 1994/95 .49 6.9 Karnataka: Distribution of Health Care Revenue Expenditures by Level of Care ...................................................... 49 6.10 Punjab: Distribution of Health Revenue Expenditures by Level of Care -- 1990/91 -- 1994/95 ...................................................... 50 7.1 Cost Recovery in Medical and Public Health Services (Non-ESIS) ........ .......... 54 8.1 Cost-Effectiveness of Interventions -- Outreach Level ............. .................... 62 8.2 Cost-Effectiveness of Interventions -- Primary Health Center Level ................. 62 8.3 Cost-Effectiveness of Interventions -- First Referral/Secondary Level ....... ....... 63 8.4 Cost-Effectiveness of Interventions -- Tertiary Level ................................... 64 9.1 Karnataka - Share of Allocations to PRIs in the Total Health Budget ................ 75 9.2 Decentralization Matrix: Scope for Change in Grassroots Administration in the Health Sector .................... ............................................. 77 FIGURES 3.1 Trends in DALYs Lost Due to Selected Diseases in India, 1990 to 2020 ........... 17 5.1 The Structure of Government Health Financing .................... ..................... 31 5.2 Channels Through Which Structural Adjustment Affects Health Spending ......... 39 9.1 The Maharashtra-Gujarat Model ..................................................... 71 9.2 The West Bengal Model .................. ................................... 71 9.3 The Karnataka-Andhra Model . ..................................................... 72 BOXES Box 1 Health Status in India and the Four States .10 Box 2 Financial Situation of the State and Implications for the Health Sector: The Example of Andhra Pradesh .43  INDIA NEW DIRECTIONS IN HEALTH SECTOR DEVELOPMENT AT THE STATE LEVEL: AN OPERATIONAL PERSPECTIVE EXECUTIVE SUMMARY A. SECTORAL BACKGROUND 1. During the past quarter of a century, India has made substantial progress in improving the health status of its population. Between 1970 and 1993, life expectancy at birth increased from 50 to 61 years and infant mortality decreased from 137 to 74 per 1,000 live births. India's health policy during this period has been based on the assumption that primary health care is a basic right to which people should not be denied access due to inability to pay or for other socio-economic reasons. Nationwide population-size based norms have determined the establishment of health facilities throughout the country. The National Health Policy (NHP, 1983) expanded this approach by specifying targets for fertility reduction and emphasized the reduction of preventable mortality and morbidity affecting mothers and young children. Greater improvements in health status could have been achieved if these priorities had been funded in accordance with the stated policy. However, public investments in health care have only partially reflected the priorities highlighted in the Government's policy. At the same time, private health services have been inaccessible to the poorest and most vulnerable sections of the population and do not address public health issues of national significance. As a result, substantial gaps remain in the effective delivery and quality of health services. 2. The health sector in India, in this period, has been characterized by: . A government sector that provides publicly financed and managed health services throughout the country, from primary health centers to hospitals, where free curative and preventive health services are made available to a large section of the population. Government-provided services are the dominant source of preventive care, such as immunization, ante-natal care, infectious disease control and hospital-based care, and account for about 22% of overall health spending and 1.3% of GDP. * A private sector comprising mainly of for-profit, fee-for-service practitioners, which plays a dominant role in the provision of individual curative care through ambulatory health services, and accounts for about 78% of overall health expenditures and 4.7% of GDP. Private health spending as a share of national income in India is amongst the highest for developing countries. Per capita expenditure is higher than in China, Indonesia and most African countries but lower than in Thailand and Malaysia. 3. Nationwide health care utilization rates show that private health services are directed mainly at primary health care, and are financed almost entirely from out-of-pocket sources. This is in contrast to the situation in many industrialized countries, where private health services are directed mainly at hospitalization, secondary and tertiary health care, little of which is financed directly by households. The reliance on such a high proportion of funds from out-of-pocket sources in India has placed a disproportionate burden on the poor.  vii Such a program is politically possible, and operationally and administratively feasible, as demonstrated by the four states. However, there is substantial variation between states in terms of their commitment to undertake reform and their capacity to implement health programs. The initiatives proposed in the report, if implemented in a timely manner, will assist in developing an effective and sustainable health system which will carry India forward to the next century. The review wili help to develop action plans in several key areas of health reform for other states that seek to enhance the performance of their health care services, improve the health status of the population and the quality of people's lives. The performance of health services would be measured against: greater effectiveness and improved outcomes of existing programs; improved efficiency in the allocation of resources; greater access and equity; and * consumer satisfaction. D. CHALLENGES AND OPPORTUNITIES AT THE STATE LEVEL 7. States in India are beginning to address health care delivery issues in more efficient ways. Nevertheless, state governments have to trigger greater change with respect to key policy reform and institutional strengthening. The major challenges faced by the states in delivering a package of health care services and enhancing the performance of the delivery system are summarized below: 8. Key Aspects of the Health Care Strategy. Three main issues with regard to the existing health care strategy at the state level need to be addressed. First, the government's health care strategy is anchored on population-size based norms rather than the specific health needs at the community level. Different needs result from variations in disease pattern, and the extent of private and non-govermment (NGO) sector involvement in health care provision at the community level. For example, at present, in the four states included in this review, conmunicable diseases account for about 53% of the burden of disease, non-communicable diseases about 30%, and injuries and accidents about 17%. There is, however, some difference between the states, indicating that a health transition is underway, with an increasing incidence of non-communicable diseases, and injuries and accidents. This transition is expected to gain momentum resulting in a considerable change in the disease pattem over the next 10 to 20 years.' Moreover, epidemiological indicators in all states today show that the disease pattem varies from community to community, and between rural and urban areas within states. Studies and data also show that the changing nature of the burden of disease, the role of other providers, the needs of the consumers and societal dynamics at the block, district, state and regional levels necessitate a change in health care planning strategy to address present and future needs. 9. Second, the technical efficiency of key programs is seriously limited, as service functions are duplicated, and technical paradigms have become out-of-date. The mechanism for delivering public health services faces serious problems, including overlapping functions and duplication among the various tiers of the health care system. Lower tier institutions such as primary health centers are It is expected that in the year 2020, the burden of non-communicable disease will increase to 57% of the total, and injuries to 19%, while the burden of communicable disease will decrease to 24% (based on data from Murray and Lopez, 1996).  ix government's objective of funding a basic package of health services, substantially more resources for health care are required, but the overall state finances noted above pose a serious problem. Second, within the health sector in most states, resource allocation in the public sector is skewed in favor of tertiary care services relative to needs at the primary and secondary levels, particularly rural and community hospitals. Third, much of the resources are absorbed by salary costs. The recurrent budget for operations and maintenance is chronically under-funded and the programs are not fully effective. 14. Alternative Methods of Health Care Financing. The resource constraints faced in the health sector will require alternative methods of health care financing to supplement budgetary allocations. Alternative methods of financing health care, such as cost recovery, social and private insurance, and participatory schemes, are limited. Reported revenue data indicate that cost recovery in the health sector is about 3% on average in India, although there are problems in estimating the level. Some of the problems faced with cost recovery include: (a) lack of an appropriate mechanism within the government to review user charges; (b) weak administrative mechanism for collecting user fees; (c) difficulty in targeting the poor for exemption from user fees; and (d) constraints to greater retention of funds generated through user charges at the point of collection. Based on international experience it should be noted, however, that a cost recovery rate of 15-20% in the health sector is about the most that can be expected in the public sector. In the long run, issues such as private insurance and managed health care will need to be addressed, as the industrial and urban sectors in India expand, and cost containment becomes increasingly important. 15. Analytical Capacity for Health Care Planning. Despite progress in recent years in the availability, quality and use of information on health financing at the national or state levels, the capacity to undertake analytical work for health planning and policy analysis remains limited within the central and state governments. For an example of what is possible, recent analytical work undertaken by the Administrative Staff College of India on the burden of disease and cost-effectiveness of health interventions has provided valuable input for health planning in Andhra Pradesh. 16. Health Care Management and Administration. The health care management system at the state level is weak. Some of the problems include: (a) ineffective overall management in the implementation of health programs; (b) overlapping functions of the different tiers of the health care system and lack of coordination and integration between them; and (c) the lack of involvement of community level organizations in revenue collection, planning and budgeting. 17. In the context of increasing decentralization of health care administration, the state governments need to build the management capacity in panchayati raj institutions (PRIs), one of the mechanisms for decentralized administration at the state level. The existing decentralized administration for health care suffers from inadequate coordination between different tiers of the PRIs, between the PRIs and technical departments, and between state level coordinating agencies. Furthermore, the PRI's limited capacities do not allow for effective health care planning and implementation, particularly with regard to resource allocation and revenue collection, planning, policy making and supervision. The inter-tier and inter-agency coordination of decentralized administrative structures needs to be improved, and the capacity of the PRIs needs to be enhanced to support health functions.  x E. RECOMMENDATIONS 18. In response to the challenges faced in the health sector at the state level in India, it would be important for state governments to undertake a series of measures to increase the effectiveness of their health systems and initiate a process of reform. The report makes the following specific recommendations: I. Reorient the Health Care Strategy (Chapter 3) 19. Integrate the Population-Size Based Approach with a Need Based Approach. To enhance the effectiveness and efficiency of health care programs, states should integrate the current population- size based approach with one that would address the health care needs of the states based on the disease pattern, and the extent of private and NGO sector involvement in health care delivery at the community level. The development of health care strategy at the state level should involve local administration in the planning process to reflect the needs at the community level. The states should provide greater input in health policy making at the national level as well. 20. States should develop the essential components of a health care system to provide a basic package of services to address the major health problems and the transition in disease patterns underway. The development of this package of services would take into account state level variations in the disease pattem, public expenditure considerations, the extent to which the private sector is providing some of these services, the extent to which poverty alleviation is part of the government's strategy in the health sector, the cost-effectiveness of health interventions, and programs that have large positive externalities. The package of services would consist of: communicable disease prevention and treatment; limited clinical services; essential and emergency obstetric and pediatric care within easy access of people living in rural areas; capacity building for prevention and health promotion programs to cope with non-communicable diseases and their risk reduction; prevention and treatment of injuries; and limited treatment of non-communicable diseases which is cost-effective, such as cataract operations and basic medical treatment of heart attack, stroke and pain relief 21. Rationalize Service Norms and Update Technical Paradigms. Service norms at different level health facilities should be rationalized on the basis of demand for services and patient load to address problems of duplication in service delivery and lack of efficiency. Analysis shows that substantial cost savings would be gained if an effective referral system was developed and services could be provided at the lower levels of the health care system before patients are pushed up to a higher tier. Incentives should be provided to increase the effectiveness of the referral mechanism between the different tiers of the health system. Once service norms have been established, new yardsticks defining the sanctioned staff at health facilities of different size, infrastructure requirement, equipment, drugs and medicine and supporting services should follow. New technical paradigms also should be adopted to strengthen the effectiveness of programs and packages of services. 22. Workforce Issues. Create Incentives for Staff Incentives should be enhanced to address the issue of shortage of critical medical personnel, particularly doctors, in remote and rural areas. Such incentives could include monetary as well as non-monetary benefits such as suitable accommodation, preferential school admissions for children of doctors living in remote areas, transfer to an urban area after a stipulated length of stay, and training opportunities in clinical and management skills. Provide Training. A large pool of staff needs retraining, and the public health functions of various personnel  xi categories should be strengthened. States should consider alternative means of engaging key technical staff on contractual arrangements. Lessons could be leamed from the experience of some state governments that are successfully utilizing staff through contractual arrangements in the implementation of some national disease control and other programs. II. Coordinate Public and Private Sectors Roles (Chapter 4) 23. The overall strategy for the health sector should take into account the existing levels of private finance and provision of services at the state level. State govemments should play an active role in creating an enabling environment for greater private sector participation in the health sector and fostering public-private partnership, while ensuring that the quality of care in both the private and the public sectors improves. There are several options for the govemment to ensure that the private health sector continues to play a vital role in the health sector and expand the scope of its activities. These are discussed below: 24. Increase Private Participation. To make more efficient use of total resources available in the health sector, state govemments need to evaluate alternatives related to direct provision of services versus public financing of some activities performed in the private sector. First, state govemments should facilitate the further expansion of the private sector in areas where it has a comparative advantage such as tertiary level health care, super-specialty and support services. Second, state govemments should encourage the private sector to adopt appropriate therapeutic norms and regimens recommended by the national programs. Third, state govemments should promote private sector participation in preventive and promotive care services by providing incentives and developing schemes to finance, train and integrate private providers in case-finding, diagnostics, and treatment for priority health problems that are of public health significance. 25. Increase Opportunitiesfor Contracting Out. There are no legal barriers inhibiting the use of contractual services for support functions, and the Contract Labor Regulation and Abolition Act (1970), which prohibits certain institutions from contracting out perennial services, exempts hospitals and health care facilities. Private contractual services are often more efficient and effective than directly hired labor. In view of the difficulties of employing government staff, such as slow recruitment procedures and poor attendance, contracting out certain services, especially support services, is an attractive altemative. The state govemments should, wherever economically attractive, contract out support services such as laundry, kitchen, landscaping, dietary services, sanitation, security and mainstream diagnostic and clinical services. In addition to economic considerations, state govemments should ensure that the quality of services is maintained. This will require improved management skills. Administrative procedures and guidelines, and adequate accountability functions should be in place to facilitate the contracting out of services. 26. Strengthen Linkages between Government and Non-Governmental Organizations (NGO). Government is the major provider of preventive and promotive health care services, but its coverage is limited. There should be a concerted effort by the states to involve credible NGOs in this area and provide them with opportunities to work with PRIs. Support for NGOs should be increased in areas such as social marketing of essential drugs and contraceptives, and behavior changing health education activities. The govemment should actively seek the cooperation of NGOs in disseminating public health messages by involving them in information, education and communication (IEC) activities. NGO participation could be promoted in the delivery of primary health care and first referral services  xil in remote and rural areas where outreach is limited, as well as in urban slums. Contracting out the delivery of primary health care in remote areas to the NGO sector, which has a comparative advantage in improving access to such health services for some disadvantaged groups, could also be promoted. 27. Expand Capacity to Monitor and Certify. The government's capacity to register, certify and monitor private health care provision, especially the qualifications of doctors and other medical personnel and the quality of their services, should be strengthened. State governments could enact legislation and issue guidelines to register nursing homes, private clinics/hospitals and ensure minimum standards of care. Some of these functions could be undertaken collaboratively by the central and state governments, while others could be undertaken by a professional body such as the Indian Medical Association in accordance with all-India standards. III. Strengthen State Financing Arrangements for the Health Sector (Chapter 5) 28. Review Fiscal Structures and Develop Budgeting and Fiscal Tools. In order to simplify the complex budgeting and accounting arrangements, the state governments should, through their Ministries of Health and Family Welfare and Finance: (a) review the fiscal structures and procedures in the health and family welfare sectors including the roles of the central, state and local government in fmancing the provision of basic inputs; (b) develop program budgeting tools at the state and central levels to monitor and evaluate expenditure for important schemes; and (c) develop fiscal tools to enable greater experimentation with resource allocation and alternative financing mechanisms, and consideration of alternatives with regard to direct provision versus financing of health care services. 29. Provide Supplementary Finance. The actual transfers of central resources to the states are not addressing inter-state equity issues, especially for those states which are most in need. To alleviate the health care financing needs of poorer states, where socio-economic and health indicators remain depressed, supplementary financing could be provided through, for example, a health resources assurance fund. Priority could be given to those states which are most in need and are taking credible steps to improve their overall finances. IV. Enhance and Prioritize State Expenditures on Health (Chapter 6) 30. Improve Overall State Finances. To address the overall deterioration in state finances, state governments should take credible steps such as: increase tax revenue as a share of state domestic product; increase the buoyancy of tax and non-tax revenue; and reduce overall public expenditures on subsidies, salaries, and poorly targeted welfare programs. By improving their overall financial situation, the states would be better equipped to address resource needs in the health sector. 31. Increase Allocation to Health within the Overall Budget. State governments, on average, need to provide 50% more resources to the present contribution of US$2-3 on an annual basis to fund their basic package of health care services. This amnount may be difficult to provide in the present fiscal situation faced by the states. At a minimum, state governments should maintain the share of health sector allocation in the overall budget to redress the downward trend in the share of resources evident in most states. 32. Re-evaluate Prierities within the Health Budget. The state governments should reevaluate the priorities within the health sector budget, especially with regard to the allocation of resources  xiii between primary, secondary and tertiary levels. The primary and secondary levels of health care need additional emphasis. This could be effected through reductions in the allocation to medical education, including tertiary hospitals, and social insurance schemes such as the Employees State Insurance Scheme (ESIS) that are not appropriately targeted to the poor. The share of primary and secondary levels, which provide the basic package of public health and clinical services, should be increased within the overall envelope of state government resources for the health sector. Over the next 3-5 years, state governments would need to allocate 75% of incremental resources allocated to the health sector to the primary and secondary levels. 33. Increase Allocations for Non-Salary Recurrent Costs. The state governments should also re-evaluate their priorities with regard to non-salary recurrent inputs such as drugs, essential supplies and maintenance budgets. With some minor variation between the states, it appears that about 75% of the health budget is absorbed by staff salaries and wages. Within these overall constraints, the state governments in the next 2-3 years should allocate adequate resources for drugs, essential supplies and maintenance budgets in accordance with established norms. In addition, the health budgets of the PRIs should be enhanced in order to allow them to carry out their maintenance functions and newly provided responsibilities. V. Implement Cost-Recovery Mechanisms (Chapter 7) 34. Develop an Instiutional Framework for Periodic Review of User Charges. The states should set up an institutional framework to review the structure of user fees and pricing policy periodically, and recommend revisions as necessary. The Strategic Planning Cells established in the health departments in the four states studied provide a viable institutional arrangement for this purpose. 35. Strengthen Collection Mechanisms and Target Vulnerable Groups for Exemptions. Analysis shows that substantial increases in revenue can be gained by concurrently strengthening the mechanism for collecting user charges and periodically revising them. State governments should increase cost recovery in the health sector from an average of about 3% to about 15-20% in the next 3- 5 years. In addition, adequate targeting mechanisms to identify the poor should be implemented both in rural and urban areas. Due to the administrative costs involved, it is preferable to strengthen the existing system for targeting the poor rather than create a new mechanism. 36. Retain Revenues at the Point of Collection. Hospitals and health facilities should be allowed to retain all of the revenues collected. Alternatively, district health committees or health systems corporations (e.g. as in Andhra Pradesh and Punjab) could be empowered on their behalf to retain such revenues and redistribute them among hospitals within the district according to both need and level of collection. 37. Utilize Revenue for Non-Salary Recurrent Expenses. Revenue collected should be used for non-salary recurrent expenditure items such as drugs, essential supplies and record keeping. A modest fee could be charged for out-patients, as is currently being done in West Bengal and charges concentrated on diagnostic and other services, as well as on voluntary services such as private rooms or wards and on medical services with a relatively low cost-effectiveness. Increased charges should be introduced in a phased manner and matched with higher quality of service.  xiv VI. Improve the Analytical Basis for Decision-Making (Chapter 8) 38. Use Cost-Effectiveness and Other Analyses to Inform Policy-Making. Cost-effectiveness analysis is an important analytical tool to aid and inform policy and decision-making in the health sector. The results have relevance for decisions regarding resource allocation for priority diseases, development of a basic package of services, rationalization of services by levels of health care institutions, and for establishing a basis for the charging of user fees. Cost-effectiveness analysis should not, however, be viewed as the only tool for decision-making. As stated in the World Development Report (1993), the most justified public measures combine a rationale for public action with a cost-effective intervention. There are several factors which need to be considered jointly in developing government resource allocation policies, including: the presence of other interventions that might affect costs; the possibility of eliminating a disease as a public health problem, such as leprosy; those diseases that have large initial costs but permanent benefits; those interventions that have positive externalities beyond health such as farnily planning; those interventions that have high poverty reduction benefits; and the pattern of private health expenditures. 39. Develop Institutional Capacity for Health Sector Planning. States should strengthen their planning capacity in the health sector to: (a) undertake analyses of their burden of disease regionally and at the community level; (b) review the cost-effectiveness of key health interventions; and (c) carry out other important analytical work, such as manpower planning. Developing local institutional capacity to undertake such analyses should remain an important priority. VII. Strengthen Public Sector Management of Health Care (Chapter 9) 40. Strengthen Overall Management Authority. Management arrangements at the state level and below should be strengthened to ensure that health programs are implemented effectively. States should strengthen the implementation and supervision capacity of the implementing agency. Andhra Pradesh and Punjab have established autonomous implementing agencies at the secondary level to improve management and administration, and provide financial and workforce related autonomy. Although this is not the only approach to improving the implementation and supervision capacity of the states, enhanced management authority with regard to finance, personnel matters and effective implementation should be ensured. It is possible for the states' Department of Health and FamilyWelfare (DOHFW) to perform these functions, but they should be given greater authority and flexibility with regard to finance, supervision and workforce related issues. 41. Enhance the Capacity of PRls. Decentralized govemance and local level participation can contribute importantly to improving the health care system, through better monitoring and supervision of the functioning of the health system at the local level, and by assisting in developing plans which take care of local perceptions and needs. Panchayati Raj Institutions (PRIs) are one way of addressing the issue of decentralized govemance. Analysis shows that, for the PRIs to be more effective, more power should be given to them in the areas of budget allocation, resource use, revenue raising, planning, policy making, supervision, maintenance and training. The notion of decentralised governance would be more meaningful only when the PRIs' capacity is enhanced and their access to resources becomes more substantial. A process of consultation and coordination between the DOHFW and PRIs in each state needs to be initiated on these aspects, and clear structures and systems need to be worked out to facilitate implementation.  xv 42. Increase Coorination between Adninistrative Agencies. Three important issues emerge from the analysis of the Panchayati Raj Acts of different states: (a) linkages between the three tiers of the PRI need to be strengthened to improve implementation of health programs; (b) co-ordination between PRIs and the technical departments needs to be strengthened to improve implementation of health programs at the grassroots level; and (c) coordination between PRIs and state level agencies needs to be strengthened by developing a viable mechanism to facilitate the effectiveness and efficiency of program implementation. F. DISSEMINATION AND ISSUES FOR FURTHER ANALYTICAL WORK 43. Dissemination. This report continues the on-going dialogue on state level health sector development issues between the Bank, GOI and state governments which was initiated in 1992. The Green Cover version of the report was discussed with senior officials of the Union Ministry of Health and Family Welfare (MOHFW) and state health officials in Goa during November 12- 14, 1996 at the Health Strategy Workshop jointly organized by the MOHFW and the World Bank, with follow-up discussions in Delhi soon after. The report has also benefited from collaboration and discussion with WHO, ODA and KfW. It is intended to widely disseminate the report within India and among the donor community, especially those agencies that have been actively involved in discussions on the development of the health sector. The report will help to continue the series of workshop and seminars that the Bank has been jointly conducting with the MOHFW and will be used as an instrument to invigorate the public debate on health sector development and reform issues in India. 44. Issues for Further Analysis. This review has covered a number of major issues with regard to health sector development and institutional strengthening at the state level. There are several other issues at the state level which would benefit from additional analytical work, including incentives for the workforce, alternative financing options such as social and private insurance, community financing, and selected aspects of the efficiency and effectiveness of technical paradigms relating to specific health programs.   xvi Table on Main Findings and Recommendations Issues Actions Key Aspects of the Health Reorient the Health Care Strategy Care Strategy: * Three main issues with regard to * Integrate the Population-Size Based Approach with a Need Based the existing health care strategy Approach: States should integrate the current population-size at the state level need to be ad- based approach with an approach that would address their health dressed: (i) inefficiencies of the care needs based on the disease pattern and the extent of private population-size based approach; and NGO sector involvement in health care delivery at the com- (ii) shortcomings in the technical munity level. The content of such a package is outlined in the re- efficiency of key programs with port and may vary across states based on their burden of disease. regard to duplication of func- * Rationalize Service Norms and Update Technical Paradigms: tions and outdated technical States should rationalize service norms; tailor yardsticks defining paradigms; and (iii) insufficient the sanctioned staff at hospitals of different sizes to fit current incentives for the workforce. needs based on patient load and service norms; create new para- digms to strengthen the effectiveness and efficiency of programs and packages of service delivery; and provide incentives to make the referral mechanism between the different tiers of the health system more effective. * Enhance Incentives for Staff and Provide In-Service Training: Incentives for staff should be enhanced in order to address the shortage of critical medical personnel, particularly doctors, in re- mote and rural areas. A large pool of staff require retraining; and states should consider hiring key technical staff on a contractual __ asis. Public-Private Partnership: Coordinate Public and Private Sector Roles at the State Level * The health care strategy at the * Increase Private Participation: State govermments should: (i) fa- state level does not fully take cilitate the further expansion of the private sector in areas where it into account the vital role of the has a comparative advantage such as tertiary health care, super- private sector in the provision of specialty and support services; (ii) encourage the private sector to selected health serices and has adopt appropriate therapeutic norms and regimens recommended not fully recognized the oppor- by the national programs; and (iii) promote private sector partici- tunities for greater private sector pation in preventive and promotive care services by providing in- involvement in policy making. centives and developing schemes to finance, train and integrate private providers in case-finding, diagnostics, and treatment of priority health problems that are of public health significance. * Increase Opportunities for Contracting Out: Where feasible, state governments should contract out support services, and diagnostic and clinical services. The decision to contract-out should be based on economic considerations, while ensuring that the quality of services is maintained. Administrative procedures and guidelines, and adequate accountability functions should be in place to facili- tate contracting-out.  xvii Issues Actions * Strengthen Linkages between Government and NGO Sectors: State governments should actively seek the cooperation of NGOs in disseminating public health messages, by involving them in in- formation, education and communications activities. Where fea- sible, they should also involve NGOs in increasing access to pri- mary health care and first referral services in remote and rural ar- eas. . The states' capacity to register, . Expand Capacity to Monitor and Certify: The states' capacity to certify and monitor private register, certify and monitor private health care provision could be health care provision is weak. strengthened and implemented by enacting legislation and issuing guidelines for ensuring minimum standards of care. These func- tions could be undertaken by the government and/or by a profes- sional body such as the Indian Medical Association in accordance .____________ ___________ _ with All-India standards. Complexity of Budgeting and Strengthen State Financing Arrangements Accounting Structures: . The existing financing arrange- . Review Fiscal Structures and Develop Budgeting and Fiscal Tools: ments and administrative struc- The Ministries of Health, Family Welfare, and Finance of the cen- tures for financing health care ter and state governments should: (i) carry out a substantial review are complex and hinder effective of fiscal structures and procedures in the health and family welfare management. sectors with regard to the roles of the center, state, and local gov- ernment in the financing of basic inputs; (ii) develop appropriate budgeting tools to monitor and evaluate expenditures for important schemes; and (iii) develop fiscal tools to enable greater experimen- tation with resource allocation and alternative financing mecha- nisms. . Center-state health care financ- * Provide Supplementary Finance: The central government could ing mechanisms do not ade- consider supplementary financing through, for example, a health quately address inter-state equity resources assurance fund, giving priority to those states which are issues. States which need funds most in need and are taking credible steps to improve their overall the most are often least able to finances. provide resources for health care programs. Low Level of Resources and Enhance and Prioritize State Expenditures on Health Efficiency in the Health Sector: * Health sector financing issues * Improve Overall State Finances: States should take credible steps need to be reviewed in the con- to increase their overall finances by: increasing tax revenue as a text of deteriorating overall fis- share of state domestic product; increasing the buoyancy of tax and cal situation in many states. non-tax revenue; and reducing overall public expenditures on sub- This is indicated by a rising fis- sidies, salaries and poorly targeted welfare programs. By improv- cal deficit, increasing interest ing their overall financial situation, the states would be better payments as a share of total equipped to address resource needs in the health sector. revenues and an increasing share of debt outstanding as a share of State Domestic Product.  xviii Issues Actions * State health and family welfare * Increase Allocations to Health within the Overall Budget: State expenditures are: (i) below the governments, on average, need to provide 50% more resources to international estimates consid- fund their basic health care package. At a minimum, state govern- ered adequate for low income ments should maintain the share of health sector allocations in the countries to meet public health overall budget to redress the share of declining resources to the priorities as suggested by the sector in most states. WDR (1993); and (ii) below the levels required to achieve the service norms set by GOI. * Public expenditures in the health . Re-evaluate Priorities within the Health Budget: The shares of sector are skewed in favor of ter- primary and secondary-level health care, which provide the basic tiary level facilities and medical package of public health and clinical services, should be increased education relative to secondary within the overall envelope of state government resources for the level hospitals, particularly rural health sector. Over the next 3-5 years, state governments would and community hospitals. need to allocate 75% of incremental resources allocated to the health sector to the primary and secondary levels. * State level health expenditures * Increase Allocations for Non-Salary Recurrent Costs: Within the on drugs, essential supplies, and next 2-3 years, state governments should allocate adequate funds operations and maintenance for drugs, essential supplies, and maintenance budgets in accor- services are low; the allocation dance with established norms. Supplemental funds from user of fuinds to the PRIs for health charges could also be targeted for non-salary recurrent cost items. care are inadequate to carry out Moreover, the health budgets of the PRIs should be enhanced in maintenance activities. order to allow them to carry out their maintenance function and newly provided responsibilities. Alternative Methods of Health Implement Cost-Recovery Mechanisms Care Financing: * There is no appropriate institu- * Develop an Institutional Framework for the Periodic Review of tional frame work for reviewing User Charges: The states should set up an institutional framework user charges; the level of cost re- to review user charges such as through the Strategic Planning Cells covery is minimal due to the low established in the health sector in the four states studied. structure of fees and inadequate . Strengthen Collection Mechanisms and Target Vulnerable Groups collection mechanisms; targeting for Exemptions: State governments should increase cost recovery mechanisms for exempting the in the health sector from an average of about 3% to about 15-20% poor from user charges are diffi- in the next 3-5 years. This can be achieved by concurrently cult to implement; and there is strengthening collection mechanisms and by reviewing and peri- no adequate mechanism to en- odically revising user charges. At the same time, adequate mecha- sure that funds collected would nisms to target the poor for exemptions from user charges should be used at the point of collection. be implemented. * Retain Revenues at the Point of Collection: Hospitals, district committees or state health systems corporation should be allowed to retain 100% of the revenues collected, for redistribution to hospitals within the district. * Utilize Revenue for Non-Salary Recurrent Expenditures: In- creased charges should be introduced in a phased manner and matched with higher quality of service. Revenue collected should be used primarily for non-salary recurrent expenditure items.  xix Issues Actions Analytical Capacity for Health Improve the Analytical Basis for Decision-Making Care Planning: . The states and the center have * Use Cost-Effectiveness and Other Analyses to Inform Policy Mak- limited capacity to undertake ing: The burden of disease and cost-effectiveness analyses of analytical work for health care health interventions should be viewed as analytical tools to broadly planning. Yet, analyses such as position policy and achieve better decision-making in the health the Burden of Disease and Cost- sector. Effectiveness analyses under- taken in Andhra Pradesh have . Developlnstitutional CapacityforHealth SectorPlanning: States proven to be very useful in should strengthen their planning capacity in the health sector and helping the state with its health provide greater input in health policy making at the national level. care planning. States should undertake analyses of their burden of disease re- gionally and at the community level; review the cost-effectiveness of key health interventions; and carry out other important analyti- cal work such as manpower planning needed to facilitate and im- prove policy-making. Health Care Management and Strengthen Public Sector Management of Health Care Administration: * Management of health care at * Strengthen Overall Management Authority: Management functions the top is diffuse, and the state with regard to finance, flow of funds, personnel matters and effec- level Departments of Health of- tive implementation in the health sector should be strengthened, ten lack authority on matters re- and the management authority needs to be given greater autonomy lated to finance, flow of funds in these key areas. The management structure could be a corporate and personnel matters. entity or a strengthened DOHFW -- both approaches are viable. * The PRIs' limited capacities and * Enhance the Capacity of PRIs: In order for the PRIs to be more problems in coordination are ad- effective, more power should be given to them in the areas of versely affecting the planning budget allocation, resource use, and revenue raising, planning, process at the lower levels of the policy-making, supervision, maintenance, and training. A process Panchayati Raj bodies. of consultation between the DOHFW at the state level and PRI needs to be initiated on these aspects, and structures and systems need to be worked out to facilitate implementation. * Increase Coordination between Administrative Agencies: Link- ages between the three tiers of the PRI need to be improved in or- der to enhance implementation of health care programs. The coor- dination between the PRIs and the technical departments and state- level coordinating agencies also needs to be improved.  CHAPTER 1 INTRODUCTION A. Background 1.1 The Government of India (GOI) and the World Bank have been engaged in a dialogue on health sector development policy since 1992. The focus of that dialogue has been on helping India address the most burdensome diseases in a cost-effective manner, while moving toward the establishment of health systems at the state level that are efficient and effective. A more sustainable health system at the state level will reduce the financial demands on the state in the future and address poverty issues in a key sector of the economy. The focus on health reform and financing at the state level is consistent with the recent Country Assistance Strategy (CAS)l, which reiterates the Bank's strategy to make health systems more effective and sustainable in India. The first part of the strategy in the health sector is to reduce the most significant diseases through the support of priority programs. The second is to strengthen the performance of the health system of the states by providing more efficient and effective health care, especially for the poorer segments of society who have limited access to basic health care services. This sector work is in line with the emphasis on private sector initiatives and the importance of focusing on state level issues such as greater effectiveness of existing programs, reform of sectoral expenditures and decentralized administration. B. Purpose and Scope of the Study 1.2 The report analyzes health care strategy and reform in the four states of Andhra Pradesh (AP), Kamataka, Punjab and West Bengal that provide valuable lessons for other states. It provides a comparative review of the experience of these four states and assists in developing action plans in several key areas of health reform for other states that seek to improve the performance of health care services, the health status of the population and the quality of people's lives. Such performance indicators include greater effectiveness and improved outcomes of existing programs, improved efficiency in the allocation of resources, greater access and equity, and consumer satisfaction. The review continues the on-going dialogue on state level health sector development issues between the Bank, GOI and state Governments which was initiated four years ago. The report has also benefited from collaboration and discussion with WHO, ODA and KfW. 1.3 The report and related dialogue will, over the next three to five years, provide a clear assessment of state level health sector strengthening and reform that needs to be undertaken to promote an effective, efficient and sustainable health system. This report addresses systemic issues and options that states face for strengthening institutional capacity and implementing a program of health reform in selected areas. Such a program is politically possible, and operationally and administratively feasible, as demonstrated by the four states. However, there is substantial variation between states in terms of their commitment to undertake reform and their capacity to implement health programs. The initiatives proposed in the report are incremental and modest, and will assist in developing an effective and sustainable health system which will carry India forward to the next century. 1 India: Country Assistance Strategy-Progress Report, Report No. IDA/R96-154/1, September 5, 1996.  2 1.4 This study elaborates what states can do to implement a program of institutional strengthening and health reform in selected areas, drawing on analyses of the changing epidemiology and burden of disease, public/private partnerships in the provision and financing of health care, center-state health financing issues, adequacy of finance and finance strategies and institutional and management issues related to decentralized initiatives at the state level. It does not, however, analyze financing issues such as health insurance or community financing, efficiency and effectiveness analyses of technical paradigm shifts related to specific health interventions, incentives for the workforce or all aspects of management and administrative arrangements, some of which have been covered in other reports or need to be further addressed. 1.5 Linkage with Previous Sector Work on Health Financing. This sector work builds upon an earlier study "India: Policy and Finance Strategies for Strengthening Primary Health Care Services", Report No. ] 3042-EN, May 1995. While the earlier study focused primarily on health care at the level of the central government, this sector work extends the discussion on the center-state relationship and focuses on health care reform issues at the state level. Subsequent to the earlier sector work, further studies, workshops and seminars on health reform at the state level were undertaken during the preparation of two state health systems projects and this sector work. The information garnered through this further work on the health sector provides some of the information and database for the report. A review was undertaken on public expenditures on health in the four states of Andhra Pradesh, Karnataka, Punjab and West Bengal; a burden of disease and cost effectiveness study was undertaken in Andhra Pradesh; a burden of disease study was undertaken in Kamataka, Punjab and West Bengal; analyses of the private sector and beneficiaries were indertaken in Andhra Pradesh, Karnataka, Punjab and West Bengal; and a study analyzing the decentralized panchayat administration system to assess their capacity to manage and supervise health programs was undertaken. Extensive discussions were held with central and state level policy makers in the health sector through workshops and seminars. The bibliography provides a listing of reports used as background material for this study. The detailed terms of reference for the study are discussed below. C. Terms of Reference for the Study 1.6 An Initiating Memorandum (IM) was issued on July 19, 1995, with the following objectives: (a) review the evolving burden of disease and cost-effectiveness of interventions at the state level; (b) analyze the role of the private sector in health service delivery, clarify the roles of the public and private sectors in the financing and provision of health services, and explore the opportunities for enhancing the scope and importance of the private sector at the state level; (c) analyze state level health expenditure data in the four states; (d) estimate the cost-effectiveness of contracting out selective services to the private sector; (e) analyze different scenarios of user-charges implemented at state level institutions; (f) investigate the practical implications of decentralizing administrative authority on health related issues to the panchayat level of administration; and (g) analyze selected aspects of the beneficiary assessments to identify the most needy populations, assist in targeting such populations and estimate the costs of delivering adequate and necessary health care to such populations. 1.7 Dissemination. The background work for the report has been conducted in a collaborative fashion with the Union Ministry of Health and Family Welfare (MOBFW) and several state Govemments. Three important serminars, held in Jaipur (February 1995), Shimla (June 1995) and Pune (October 1995) have contributed extensively to sharpening the issues to reflect the priorities and  3 to operationalizing the recommendations. Collaborative work has also been conducted with local institutions, who have provided inputs to this report. These include the Administrative Staff College of India (ASCI), the Delhi Institute of Economic Growth, Operations Research Group (ORG), and the Foundation for Research and Development of Underprivileged Groups, in addition to those who contributed to the previous health sector report. The Green Cover version of the report was discussed with the Union Ministry of Health and Family Welfare (MOHFW) officials and state health officials in Goa during November 12-14, 1996 at a Health Strategy workshop jointly organized by the MOHFW and the World Bank. This was followed by further discussions in Delhi with senior MOHFW officials. The report has also benefited from collaboration and discussion with WHO, ODA and KfW. It is intended to widely disseminate the report within India and among the donor community, especially those who have been actively involved in discussions on the development of the health sector in India. This report will help to continue the series of workshop and seminars that the Bank has been jointly conducting with the MOHFW. The report will be used as an instrument to invigorate the public debate on health sector development and reform issues in India. D. Structure of the Report 1.8 The chapters in this report are organized as follows: (a) Chapter 2 provides a discussion of the challenges and opportunities in the health sector at the state level in India. The key issues highlighted are: health care strategy, epidemiology and burden of disease; public/private roles in the provision and financing of health care; allocative efficiency of health care resources; supplementary mechanisms for augmenting health care financing through user charges; cost- effectiveness of key health interventions; and health care management and administrative issues related to Panchayati Raj institutions (PRIs) and decentralized administration. (b) Chapter 3 provides a comparative overview of the health sector in the four states including the sectoral background and demographic features in Andhra Pradesh, Karnataka, Punjab and West Bengal; the evolving burden of disease and epidemiology; and the changes in emphasis that will be needed to address the health transition and the epidemiological polarization in India over the next twenty years. (c) Chapter 4 summarizes the role of the private sector in the delivery of health care services at the state level, covering the availability and cost of private health services; access to private health services; provision vs. financing of health services by the public and private sector; and public/private/voluntary sector partnerships in providing health services. (d) Chapter 5 discusses center-state financing issues; central, state and local government responsibilities in health finances; inter-state equity issues; government health expenditures in all states; patterns of health expenditures across states; and mechanisms of adjustment effects on center-state resource transfers.  4 (e) Chapter 6 analyzes public sector health expenditures in the four states included in this review; trends in state level public expenditures on health and family welfare; per capita expenditures on health; the effects of fiscal adjustment on health budgets; the share of budgetary resources devoted to health; the composition of health budgets; and future trends in public sector health financing. (f) Chapter 7 analyzes supplementary financing mechanisms related to user charges; existing practices relating to user fees in the four states; and the potential for raising revenues from user fees at the state level. (g) Chapter 8 discusses the cost-effectiveness of health interventions, using the Andhra Pradesh Burden of Disease and Cost Effectiveness of Interventions study as a basis for drawing lessons for other states. (h) Chapter 9 discusses the opportunities to improve implementation of health care delivery by decentralizing management and administration in the context of PRIs at the state level; key linkages between the state health administration and PRIs; and the role of PRIs in health care delivery.  5 CHAPTER 2 CHALLENGES IN THE HEALTH SECTOR A. Sectoral Background 2.1 During the past two decades the govemment has developed a health care system which finances and manages a basic health care infrastructure. Government-provided services are the dominant source of preventive care, such as immunization, ante-natal care, infectious disease control, as well as hospital-based care, and account for about 20% of overall health spending. The private sector, on the other hand, provides individual curative care through ambulatory care services for acute illnesses or illnesses not requiring hospitalization, and accounts for about 80% of overall health expenditures. Nationwide health care utilization rates show that the services provided by the private health care are highest for primary health care, such as visits to general practitioners, and are financed almost entirely from out-of-pocket sources. This is in sharp contrast to the situation in industrialized countries, where hospitalization, secondary and tertiary health care services account for the largest share of spending, little of which is financed directly by households. The reliance on such a high proportion of funds from out-of-pocket sources in India places a disproportionate burden on the poor. Private health services are inaccessible to the poorest and most vulnerable sections of society and do not address public health issues of national significance. As a result, substantial gaps remain in the effective delivery of health care services provided to the population. 2.2 The Government's long-term strategy, as enunciated in the National Health Policy (1983), gives high priority to the control of fertility, infectious diseases of public health importance and preventable causes of matemal and childhood mortality and morbidity. This is an appropriate policy given India's burden of disease. However, investment allocations only partially reflect the priorities highlighted in the Government's policy. Public spending on health is about 1.3% of GDP which is lower than in comparable Asian countries. The bulk of public spending on health, about three-quarters, is accounted for by the states, which are primarily responsible for implementing health programs. As a result, a major area of financing and policy reform to increase efficiency and improve effectiveness of health programs needs to be targeted at the state level. B. Looking to the Future: Challenges and Opportunities at the State Level 2.3 States in India are making progress in pursuing more efficient approaches to addressing health care delivery. Nevertheless, the states need to develop the essential components of a basic package of health services to address the health transition underway and the major health problems which will face them in the coming years. At present, in the four states included in this review, communicable diseases account for about 53%, non-communicable diseases about 30%, and accidents and injuries about 17% of the burden of disease on average. Epidemiological indicators show that disease pattems vary by states, with states more advanced in the health transition having a higher proportion of non- communicable diseases and injuries. The health transition is expected to gain momentum and is likely to result in considerable change in the disease pattem over the next ten to twenty years (see Chapter 3). 2.4 A basic health care package should take into account these state level variations in epidemiology and burden of disease. The package of services would consist of: communicable disease  6 prevention and treatment; limited clinical services; essential and emergency obstetric and pediatric care within easy access to people living in rural areas; capacity building for prevention and health promotion programs to cope with non-communicable diseases and their risk reduction; prevention and treatment of injuries; and limited treatment of non-communicable diseases which is cost-effective, such as cataract operations and basic medical treatment of heart attack, stroke and pain relief Within this framework, the development of the package of services would take into account public expenditure considerations, the extent to which the private sector is providing some of these services, the extent to which poverty alleviation is part of the government's strategy in the health sector, the cost-effectiveness of health interventions, and programs that create large extemalities. The package of services needs to be developed through a consultative and collaborative process, involving leading health practitioners and policy makers from the different levels of the health system, private and NGO sectors for social input, and the Finance Department of the state govemment to assess the financial ability of the state to provide the recommended package of services. 2.5 In order for the states to provide a basic package of services, which would be targeted to the needy sections of society, state governments would need to undertake a series of measures to reorient their health care system by strengthening institutional capacity and initiating a process of policy reform . These are discussed below. 2.6 Key Aspects of the Health Care Strategy: Three main issues with regard to the government's health sector strategy include: (a) the need to integrate the government's population-size based health care strategy from with an approach that addresses the health care needs of the people. The government's current health care strategy is based on a network of primary health care centers that are more or less uniformly interspersed across the country on the basis of population size. This approach is neither an efficient nor an effective way to address health care needs of different sections of the population because of the variation in the epidemiological profile and public-private mix across communities, blocks, districts, states and regions in the country. There is a need to revisit the health care strategy and fine-tune it based on epidemiological data available at the grassroots level, and the extent of involvement of private and NGO sectors in health care delivery. The panchayat administration provides an excellent basis for greater community level participation in the planning process for health care services, but the structures and systems linking the panchayat admninistration with health administration will need to be more clearly defined; (b) the need to improve technical efficiency of key programs which are seriously limited, rationalize service norms at various health facilities, improve staffing norms to better address need and patient load, improve effectiveness of the referral mechanism and update some of the technical paradigms. For example, the mechanism for delivering public health services faces serious problems, including overlapping functions among the various tiers of the health care system. Services provided at different tiers of the system are often duplicated and there is no clear delineation of services at each type of facility -- the lower tier institutions such as primary health centers (PHCs) are underutilized due to a multitude of reasons, including a lack of support from first referral institutions. The same applies for national disease control programs. There are some positive trends. The leprosy control program, for example, has shifted to a multi-drug therapy approach from the ineffective Dapsone monotherapy that was used in the past; other inadequacies in coverage, insufficient disability and ulcer care, inadequate detection  7 among female patients, low public awareness of the disease and associated social stigma are also being addressed. Similar paradigm shifts are needed for TB, cataract blindness, malaria and other national programs that are implemented at the state level; and (c) the need to provide better incentives for the workforce and address training needs. Problems related to the availability and quality of staff impede the technical efficiency of health programs and affect productivity. Overall, there is no shortage of doctors in the country but there is a shortage in remote and rural areas. There is also a shortage of nurses nationwide. Incentives need to be provided to medical professionals to encourage them to remain in their rural posts, thereby decreasing absenteeism. Training facilities and in-service training are limited, and professional staff are not up-to-date in clinical and management skills. A better understanding of the shortage of critical medical personnel and manpower needs is required. 2.7 Public-Private Partnership in the Delivery of Health Care Services. Despite accounting for 80% of overall health expenditures, the role of the private sector in the overall health care strategy is not clearly defined. The vital role the private sector plays in the provision of selected aspects of health services, such as ambulatory care, and the opportunities which remain for greater private sector involvement in other areas have not been fully recognized in policy making. The main challenges with regard to strengthening the public-private partnership in the delivery of health care services include: enhancing the scope and importance of the private health sector, while improving the quality of services; encouraging private sector involvement in preventive and promotive aspects of health care rather than solely in individual curative care; finding the appropriate mix between direct provision versus public financing of some activities performed by the private sector; promoting partnership between the public, private, and voluntary sectors; and improving the existing arrangement for regulating and monitoring private health care. 2.8 Resource Allocation and Efficiency in the Health Sector. The overall fiscal situation in many states has deteriorated sharply, with a rising fiscal deficit, increasing interest payments as a share of total revenue, and an increasing share of debt outstanding as a share of state domestic product. The overall financial situation faced by the states has affected health sector allocations. The public sector currently provides about US$2-3 per capita for health. The amount recommended by the World Development Report (1993) to provide a basic package of public health and clinical services for low income developing countries is about US$12 per capita annually. In the context of the Indian states, this may be a high estimate. Nevertheless, a sizable increase over the present allocation will be required to finance a broadly defined package of services. Moreover, within the health sector at the state level, resource allocation is skewed in favor of tertiary relative to primary and secondary services, and this imbalance needs to be corrected.2 In addition, since much of the resources are absorbed by salary costs, the recurrent budget is chronically underfunded. Recognizing that overall state finances pose a serious problem, the state govemments' objective of funding a basic package of health service will require more resources for health care, especially for primary and secondary health care services. 2 The terms first referral and secondary level hospitals are used synonymously in this report. They denote community/rural hospitals that have a bed strength of about 30-50 beds; area/taluka hospitals that have about 75-100 beds; sub-divisional/State General hospitals that have about 100-350 beds; and district hospitals that have about 300-550 beds. The level of services offered increase from community to area to sub-divisional to districts hospitals.  8 2.9 Alternative Methods of Health Care Financing. Since cost recovery mechanisms in the health sector are not well developed in India, revenue collection remains low. Some of the problems faced in this area include, inter alia: lack of an appropriate mechanism to review user charges; weak administrative mechanism for the collection of user fees; difficulty in targeting the poor for exemption from user fees, and constraints to greater retention of funds generated through user charges at the point of collection. The resource constraints faced in the health sector will require development of alternative methods of health care financing, such as cost recovery, private and social insurance and participatory schemes. 2.10 Analytical Capacity for Health Care Planning. Despite progress in recent years in the availability, quality and use of information on health financing at the national or state levels, the capacity to undertake analytical work for health planning and policy analysis remains limited within the central and state governments. States should undertake analyses of their burden of disease regionally and at the community level; review the cost-effectiveness of key health interventions; and carry out other important analytical work such as manpower planning needed to facilitate and improve policy- making. 2.11 Health Care Management and Administration. The health care management system at the state level is inefficient. Some of the problems that need to be addressed include: weak overall management and health planning capacity; overlapping functions of the different tiers of the health care system and lack of coordination and integration between them; uncertainties associated with the decentralization of authority to the panchayat system on the administrative operations of health care provision and financing; and the lack of involvement of community level organization in revenue collection, planning and budgeting. Health care management at the state will need to be strengthened by addressing these issues. 2.12 The key issues in the health sector are inter-linked. The dynamics between them will continue to affect the effectiveness and performance of the health care system. The improvements in the health sector will be measured by greater effectiveness and improved outcomes of programs, improved efficiency in the allocation of resources, greater access and equity, and consumer satisfaction.  9 Chapter 3 BACKGROUND TO HEALTH POLICY AND PLANNING: DEMOGRAPHIC FEATURES, EPIDEMIOLOGY A-ND THE BURDEN OF DISEASE IN THE FouR STATES A. Introduction 3.1 The challenge faced by each state in the health sector varies to some extent depending on the burden of disease, existing public health programs, past pattern of investment in the health sector, involvement of the private sector and the level of poverty. While resource allocation, institutional weaknesses and management issues are themes common to the health care system in all states, the demographic characteristics, epidemiological features and the burden of disease determine the nature of the health problems faced by each state. This chapter provides a brief outline of the basic demographic features, the epidemiological profile and the comparative burden of disease in the four states included in this review. The findings of the Andhra Pradesh Burden of Disease (AP BOD) and the BOD estimates for Kamataka, Punjab and West Bengal are presented to illustrate the main differences between the states. These differences show the varying pace of the health transition across states -- the differences are especially marked between rural and urban areas. 3.2 The states of AP, Kamataka, Punjab and West Bengal are included in this analysis because of the richness of the data that was generated during the preparation of the state level health systems projects and through subsequent analysis of the BOD in these states. They provide an opportunity to study states that are at different levels of health and overall development, and have diverse geographical, cultural and socio-economic features. West Bengal, for example, is a state with large pockets of poverty and an underdeveloped private sector in health care provision; Karnataka and AP are states with a per capita income which is about the national average, but with large regional variations; and Punjab is a state with a high per capita income, which requires a somewhat different emphasis in the type of health package proposed. Together, they represent sufficient diversity among states in India to draw lessons that are applicable at the state level generally. 3.3 These four states also represent different stages in the health transition -- ranging from a high incidence of communicable disease, with relatively lower levels of non-communicable disease and injuries to a situation of high levels of non-communicable disease, with relatively lower incidence of communicable disease and injuries. The poorer and more populated states, such as West Bengal, still face a large incidence of communicable diseases. More prosperous states, such as Punjab, are further along in the health transition and are seeing a sharply increasing incidence of non-communicable diseases, especially in urban areas. There are states that are poorer than West Bengal and less advanced in the health transition process (such as Orissa) and others that are further along in the health transition (such as Kerala or Maharashtra), but the four states included in this review generally represent the main spectrum of health care issues faced by the Indian states.  10 Box 1: Health Status in India and the Four States Andhra West India Pradesh Karnataka Punjab Bengal Population (millions in 1995) 919 66.5 47.9 20.3 72.4 Annual Growth Rate of Population 2.1 2.2 1.9 2.1 2.2 Crude Birth Rate 28.7 24.2 25.9 25.0 25.5 Crude Death Rate 10.1 9.1 8.5 8.2 7.3 Infant Mortality Rate 78.5 70.4 65.4 53.7 75.3 Expectation of Life at Birth 60.6 59.1 62.1 66.6 62.0 Percentage of Currently Married Women 13-49 Using any Contraceptive Method 40.6 47.0 49.1 58.7 57.4 Pregnant Mothers Receiving Ante-natal Care 78.1 86.0 84.0 85.1 80.0 Andhra Pradesh: The population of Andhra Pradesh was about 67 million in 1995, with a population density of 242 people per square kilometer, which was lower than the all India average of 270. The percentage of Scheduled Castes (SCs) and Scheduled Tribes (STs) is slightly lower than the all India average, while the sex ratio of 972 females per 1,000 males is higher than the Indian average of 927. The state has become more urbanized, with 27 percent of the population living in urban areas in 1991. Karnataka: The population of Karnataka was about 48 million in 1995, with urban areas accounting for about 31 percent of the population. SCs and STs constitute about 16.4 and 4 percent of the state's population respectively. With 40 percent of its population living below the poverty line compared with about 33 percent for India as a whole, the state has a comparatively large percentage of people living in poverty. Punjab: With a population of 20 million in 1995 and an annual population growth rate of about 2.1 percent, Punjab is one of India's more afiluent states. Its population density of 403 per square kilometer in 1991 is high compared to the Indian average of 273, as is the percentage of the population living in urban areas (29.6 percent as compared to 23.9 percent for India). Punjab's 1991 per capita income at $554 ranked it first among Indian states in terms of income. Yet 12 percent of the state's population is living below the poverty line. Also, as in other states, there is substantial regional variation in per capita income, with the northwest corner of the state having 40 percent of its population below the poverty line. While social indicators have improved on many fronts, the female-male sex ratio at 882 females per thousand males is still a matter of grave concern. West Bengal: With a population of about 72 million, West Bengal is the fourth most populated Indian state. Around 40 percent of the population is below 15 years of age, and only 27.5 percent live in urban areas. The large rural population is mainly agricultural, with a predominance of small and marginal farmers. It is estimated that more than 30 percent of the rural population lives below the poverty line. STs constitute 5.6 percent of the population and 23.6 percent belong to SCs. Figures, unless otherwise noted, are from National Health Survey, 1991. B. The Health Transition 3.4 Key health indicators in India show that the health status of its population remains low. Communicable diseases continue to be major health problems; maternal mortality is high; acute  11 respiratory and diarrheal diseases account for a large proportion of childhood mortality; and preventable mortality and morbidity especially among the poor, exact a high toll. Health indicators in India, when compared with other countries in the region that started with a similar resource base several decades ago, show that India has not fared as well as some of its neighbors. The gains in life expectancy over the past three decades, for example, have been 23% in India compared to 60% in China and 28% in Indonesia (World Development Report, 1993). 3.5 In addition, India is moving into an epidemiological transition. Communicable diseases and matemal and perinatal causes currently account for a large number of deaths in India (about 470 per 100,000 population, standardized for age, compared to only 117 in China and 187 in the world as a whole).3 At the same time, the gains achieved in life expectancy have resulted in proportional increases in mortality from chronic and degenerative diseases of adulthood, such as heart ailments, cancers and risk factors. These trends are likely to persist. As fertility declines, the age structure of the Indian population will shift and the proportion of people above the age of 60 years will increase as will the risk factors. As a result, the burden of non-communicable diseases will rise further. At the same time, the challenge of communicable diseases of the young, middle-aged, and poor will persist. The central and state govemments, therefore, will need to deal with both a high level of communicable diseases and a rising incidence of non-communicable diseases and injuries and accidents. 3.6 This dual burden of communicable and non-communicable diseases is likely to result in an "epidemiological polarization" in which one part of the Indian population will successfully complete a demographic and epidemiological transition while another part remains in the pretransition phase. Indeed, this situation is already present in India, especially in terms of the differences between rural and urban areas, and accounts for much of the dilemma for the publicly provided health care system. The demands of the rural and urban middle and upper classes for accessible, technologically advanced, and free clinical services compete with the still pressing need for coverage with basic disease control interventions in rural areas. As a result, the conflict over public resources is likely to be exacerbated by the on-going epidemiological and demographic changes and poses a major future challenge for primary health care policy at the state level in India. Moreover, the competition for scarce resources has the potential to worsen the unequal quality of health care among the states, as the poorer states are unable to provide the matching funds required to qualify for some federal monies. C. Epidemiology and the Evolving Burden of Disease in the Four States 3.7 For a long time, mortality was the predominant indicator in assessing the health status of populations (Murray and Lopez, 1996). The burden of disease has traditionally been based on the number of deaths different diseases cause and has relied on mortality data. This approach served the purposes of development planners for a long time, since cause specific mortality used to correlate well with morbidity and disability, particularly for many infectious and parasitic diseases. Over time, with the decline of mortality rates, morbidity measures have come to assume greater importance in quantifying the burden of disease, and the inadequacy of mortality as a measure of health status is increasingly recognized. For example, there is now evidence that low child mortality levels can be maintained even in the presence of sustained high levels of under-nutrition and morbidity. For both communicable and non-communicable diseases, there is increasing recognition that assessment and 3 World Development Report, 1993; Table A.7.  12 reduction of risk factors can lead to health gains. For example, low caloric and micro-nutrient intake, infections and poor breast feeding predict childhood malnutrition; and cholestorol, smoking and hypertension predict cardio-vascular diseases. 3.8 This calls for indicators that can simultaneously combine the load of morbidity, disability and risks with the level of mortality. Burden of disease estimates provide a mechanism of aggregating and comparing the size of various health problems through a single indicator, which is the Disability- Adjusted Life Years (DALY).4 The World Health Organization, together with the World Bank, developed a methodology and presented estimates of the full loss of healthy life due to different causes in terms of DALYs lost in the WDR (1993), which has been updated by Murray and Lopez, 1996. According to these estimates, India accounted for 288 million DALYs lost in the year 1990, which is over 21 percent of the global burden of disease, even higher than its share of overall mortality. 3.9 Methodology. The Andhra Pradesh BOD study and subsequent analyses in Karnataka, Punjab and West Bengal form the basis of the discussion of the BOD in this chapter. These studies were commissioned by the Bank and undertaken by the Administrative Staff College of India (ASCI), with the objective of: (a) estimating the BOD caused by common diseases including accidents and injuries; and (b) comparing the disease burden in urban and rural areas of the four states. The cost- effectiveness of selected health interventions using DALYs as a measure of effectiveness was also undertaken, but only for AP, and is discussed in Chapter 8. The BOD part of the study analyzed the following data: (i) demographic estimates, including age-specific mortality, preliminary disease lists, and surveys of the cause of death; (ii) information gathered from expert opinion and field inquiry; and (iii) a literature review of existing epidemiological studies and available data. 3.10 The methodology of the AP BOD study was repeated in the other three states included in this review. Estimates of disease burden for 1992 were used, since this is the latest year for which Sample Registration System data on age and sex specific mortality rates are available. Population projections for 1992 were made using the exponential method. In the three states, original data were used for the urban areas, which was obtained from the Medically Certified Causes of Death Register. In rural areas, sample cause of death was used based on verbal autopsy. For disability, epidemiological information from the national programs at the state level were used to get at the state-specific prevalence data. Incidence data in each state was modified from the AP data on the basis of state- specific disease patterns ( e.g. kala-azar exists in West Bengal, but not in AP) and on the basis of existing empirical evidence in each state. The incidence rates in each state were calculated based on the prevalence rate, general mortality and remission data, using the standard "Dismod" model. 3.11 Findings of the BOD Estimates. The data are summarized in Tables 3.1, 3.2, 3.3 and 3.4. They are presented according to DALYs lost in rural and urban populations, in absolute numbers, as well as DALYs lost per thousand population. Diseases are categorized as follows: (a) category I: communicable diseases, including TB, sexually transmitted diseases, diarrheal disease, meningitis, hepatitis, malaria, tropical cluster, childhood cluster, leprosy, trachoma, 4 The WDR (1993) defines Disability-Adjusted Life Years (DALYs) gained as a unit used for measuring both the global burden of disease and the effectiveness of health interventions, as indicated in the reduction in the disease burden. It is calculated as the present value of the future years of disability-free life that are lost as a result of the premature death or cases of disability occurring in a particular year.  13 intestinal helminths, respiratory infections, maternal causes and perinatal causes. Since nutritional deficiency disorders predominate in the pretransition phase, they were also included in this group; (b) category II: non-communicable diseases (NCD), including malignant neoplasms, diabetes, neuropsychiatric disorders, sense organs, cardiovascular, respiratory, digestive, genitourinary, and musculoskeletal disorders, as well as dental health; and (c) category m: accidents and injuries. Table 3.1: DALYs Estimated to be Lost During the Year 1992 State Rural Urban Al Andhra Pradesh 14,037,909 3,619,609 17,657,518 Karnataka 8,945,778 2,616,910 11,562,687 Punijab 3,942,743 1,268,929 5,193,672 West Bengal 14,032,832 3,274,114 17,306,947 3.12 An important finding of the BOD estimates in the four states is that the distribution of the BOD between categories I, II and III is different from the distribution presented in the WDR (1993), but sirilar to the updated version presented by Murray and Lopez (1996). The first difference is with regard to the contribution of NCD (category II) to the overall BOD. In AP, Karnataka, Punjab and West Bengal, the contribution of category II amounted to about 30%, 28%, 29%, and 28% respectively. This compares to 41% estimated in the WDR (1993), but is more in line with the 29% estimated by Murray and Lopez (1996) for India as a whole. A small percentage of this difference could be explained by the exclusion of nutritional deficiency disorders from category II in the BOD estimates for the four states and in the Murray and Lopez estimates (1996). The second difference is with regard to the contribution of injuries and accidents (category E1) to the overall BOD. In the four states, the contribution of category Im to the total BOD ranges from between 15% and 19%, whereas the WDR (1993) estimate, for all of India, was about 9% and the Murray and Lopez (1996) estimate is about 15%. The difference between the BOD estimate in the four states and the WDR (1993) estimate with regard to the contribution of communicable disease (category I) is not significant. However, it should be noted that these model based estimates are subject to considerable imprecision, as shown by the marked changes between different DALY estimates for NCD. Improving these estimates will require much better data collection, such as the disease-surveillance point surveillance used in China or strengthened and expanded Rural Cause of Death Survey conducted by the Registrar General of India. 3.13 As shown in Table 3.1, Andhra Pradesh had the highest total of DALYs lost in 1992, at about 17.7 million, followed by West Bengal, at 17.3 million. Karnataka and Punjab followed, with about 11.6 million and 5.2 million respectively. The DALYs lost are roughly in proportion to their overall population. The total DALYs lost in rural areas accounted for 80 percent of the total number of DALYs lost in Andhra Pradesh and West Bengal, but was slightly lower for Punjab at 76 percent and Karnataka at 77 percent. Data elsewhere also indicates that the relative burden of disease seems to be higher among the residents of rural areas.  14 3.14 The data also show that the DALYs lost per 1,000 population in rural areas of Andhra Pradesh, Karnataka, and Punjab are similar at approximately 289, 288 and 272 DALYs lost per 1,000 respectively. The figure for West Bengal was lower at about 276 DALYs lost per 1,000, largely because of the lower DALYs lost per 1,000 in urban areas. Punjab and AP are estimated to have a higher disease burden in urban areas relative to the other states, at about 205 and 202 DALYs lost per 1,000, respectively, as against only about 171 and 184 DALYs lost per 1,000 in West Bengal and Karnataka. As shown in Table 3.2, the greatest difference between urban and rural areas was found to be in West Bengal and Karnataka, with a difference of about 105 and 103 DALYs lost per 1,000 respectively, indicating relatively poorer access to health care in the rural areas in these two states. Table 3.2: DALYs Lost per 1,000 Population Urban-Rural | State Rural Urban Total Differences Andhra Pradesh 289 202 266 87 Karnataka 288 184 253 103 Punjab 272 205 252 67 West Bengal 276 171 248 105 Table 3.3: DALYs Lost per 1000 Population by Major Cause Groups in Rural and Urban Areas State l Rural Urban -I L I i III III I II LI Andhra Pradesh 160.0 81.5 47.2 97.7 74.3 30.5 Karnataka 168.0 72.2 43.6 86.5 66.7 30.3 Punjab 153.2 72.5 45.9 93.8 71.8 39.7 West Bengal 164.4 68.6 44.4 71.0 71.1 28.7 3.15 Communicable diseases (category I in Table 3.3) still predominate in the rural areas of all four states. The total DALYs lost per 1,000 in rural areas in this category in AP, Kamataka, Punjab and West Bengal were about 160, 168, 153 and 164 respectively. The total DALYs lost per 1,000 in category II and Im combined in rural areas was much less at about 129, 116, 119 and 113 respectively. Moreover, the magnitude of the disease burden caused by communicable diseases closely corresponds to the total burden, following the trend in all developing countries. This trend, however, was reversed in urban areas, where in all states, the total of DALYs lost per 1,000 in category II and HI was higher than that of category I, indicating that the urban areas are in a more advanced state of demographic transition. The predominance in Punjab of DALYs lost per 1,000 due to diseases in category Im, especially in urban areas, can partly be explained by the political disturbances in the state during that period. 5 5 It should be noted, however, that the number of inpatient and outpatient hospital visits, and their distribution between the different categories of diseases may be quite different from the burden of disease. In Punjab, for example, hospital level data indicates that category II cases account for about 76% of all outpatient hospital visits and about 86% of all inpatient visits in Punjab. In Karnataka, comparable data indicates that category I and category II diseases contribute almost equally to outpatient visits -- about 36% and 38% respectively. With regard to inpatient visits, however, there is a significant difference, with category I diseases contributing only 27% of hospital visits as compared to 49% by category II diseases.  15 Table 3.4: Total DALYs Lost by Major Cause Groups Population in DALYs lost DALYs lost per 1,000 State Thousands I I m I m || A.P. 66,508 9,528,102 5,288,635 2,840,781 143.26 79.52 42.71 | Karnataka 45,781 6,529,396 3,227,299 1,805,992 142.62 70.49 39.45 Punjab 20,628 2,793,402 1,491,451 908,818 135.41 72.30 44.06 West Bengal 69,692 9,684,410 4,829,643 2,791,562 138.96 72.30 40.06 3.16 DALYs Lost by Age Group. The overall distribution of DALYs lost per 1,000 population in different age groups indicate that the pattern is more or less similar in all the states. The highest burden was estimated in the 0-4 years age group, while in the 5-14 years age group the burden was least. In the 15-44 years age group the burden of disease was relatively higher among females due to maternal disorders. 3.17 The distribution of the DALYs lost in each age group by major cause category (categories I, II and IE) indicate that among the 0-4 years age group, category I disorders were dominant as expected. Punjab had a relatively lower burden due to category I disorders among males in this age group. The differences between both sexes with regard to category I diseases were more marked in Punjab (a difference of 85 DALY per 1,000 between male and female children) as compared to the difference in other states, thereby indicating higher vulnerability of female children in Punjab. 3.18 In the 5-14 years age group, the burden caused by category I diseases was close to that of total burden caused by categories II and Im together. In fact, the burden caused by category II in most states was responsible for a third of the burden among males. This is quite plausible, considering the higher vulnerability of this age group to injuries and accidents. The corresponding proportion in case of females was less than 25%, suggesting that female children are less prone to injuries in this group. 3.19 In the 15-44 years age group, the epidemiological transition is quite evident in males. The total of category II and category Im disorders was nearly double that of category I. However, in case of females the trend observed in the 5-14 years (category I burden being equivalent to total of categories II and III) still continued, essentially due to higher burden caused by maternal conditions. Thus, the analysis clearly indicates that there is an urgent need to address maternal health problems on a priority basis. Surprisingly, Punjab had the highest burden due to category I among females in this age group. This has implications related to access for essential and emergency obstetric services. 3.20 In the 45-49 years age group, the epidemiological transition is quite evident as degenerative disorders (category II) are dominant. However, in the case of women, the burden caused by all the major cause categories was estimated to be relatively low compared to males. This trend was especially marked in the case of degenerative disorders (difference of 40-60 DALYs per 1,000).  16 3.21 In the 60+ age group the degenerative disorders are the dominant cause of burden of disease in both sexes. Higher relative burden of category m disorders among females could be partly explained on the basis of higher vulnerability to injuries due to osteoporotic changes and hormonal imbalances. 3.22 Forecast of DALYs lost due to Selected Diseases in India, 1990-2020. Murray and Lopez (1996) provide a possible scenario of the disease burden for India in the year 2020. They provide a set of projections for important causes of death and disease burden until 2020, based on a statistical model, to predict different scenarios of cause specific mortality. They have calculated the change in DALYs that would occur if 1990 age-specific DALYs are applied to the population projections for 2020 and the change in DALYs if 2020 DALY rates are applied to 1990 population. These predictions are based on four independent variables: (i) income per capita; (ii) human capital, estimated as the average number of years of schooling in a population; (iii) smoking intensity; and (iv) time, reflecting growth of knowledge. DALYs lost for the year 2020 are determined by the interaction of a growing and aging population with changes in the projected level of the four variables noted above. Changes in DALYs can be divided into two components: (i) the demographic factor -- increase or decrease expected due to changes in size of the population; and (ii) the epidemiological factor -- the increase or decrease expected due to changes in age-specific DALY rates (WHO, 1996). 3.23 The projected changes in disease burden are shown in Figure 3.1. The decrease in DALYs lost is dramatic for diarrhoeal diseases and respiratory infections. Less dramatic, but significant decreases are noted for maternal conditions. TB is expected to plateau by the year 2000, and HIV infections are expected to rise significantly upto the year 2010, after which a decline is expected. On the other hand, cardio-vascular diseases, resulting mainly from risk associated with smoking and diet, is expected to increase dramatically. Injuries are expected to increase less significantly, and so are neuro-psychiatric conditions and malignant neoplasms.  17 Figure 3.1: Trends in DALYs lost due to selected diseases in India, 1990 to 2020 70 60 - Diarrhoeal diseases & respiratory \infections 50 - \ Injuries Cardiovascular o: \ / diseases :i40 -- Neuro- >330 -- psychiatric conditions 20 4 Tuberculosis^ Malinpant_ HI 10 neoplasms HIX Maternal O --- > I I Conditions 1990 2000 2010 2020 Year Source: Based on data from Murray & Lopez, 1996.  18 Table 3.5: Percent of Total DALYs Lost by Major Cause Groups: 1990 and projected for 2020 __________________________ 1990 2020 Category I 56 24 Category II 29 57 Category Im 15 19 Source: Based on Murray and Lopez, 1996. 3.24 Table 3.5 shows that the disease burden in India, estimated for 1990 at about 56% for category I, 29% for category II and 15% for category III is predicted to change dramnatically by the year 2020, to 24% for category I, 57% for category II and 19% for category Im. These changes can be attributed to the epidemiological and demographic factors discussed in para. 3.22. The dramatic change resulting in a lower share of category I diseases can be explained mainly by the reduction in DALYs lost due to epidemiological factors, offset only marginally by increase in DALYs lost due to demographic factors. For category II diseases, the situation is reversed -- the dramatic increase in the share of the disease burden of category II diseases can be explained mainly by the increase in DALYs lost due to demographic factors, offset marginally by the decrease in DALYs lost due to epidemiological factors. For category m diseases, the increase in the share of disease burden from 15% to 19% is explained mnainly by the increase in DALYs lost due to demographic factors, which is somewhat offset by the decrease in DALYs lost due to epidemiological factors. D. Recommendations