Federal Nepal: Health Service Delivery

Dr. Uma Shankar Prasad

CEDA, Tribhuwan University, Nepal

Health care has been accepted as a very important means of development. It is an important area of human right. Government in many countries today has involved in health care system in varieties of ways: directly paying for health care, subsidizing individual purchases of health care, health insurance, direct involvement in health services, financing and conducting research, preventing the spread of communicable diseases, regulating drugs and medical services, and so on.

Some health expenditures have public good quality like medical research and prevention of communicable diseases. Benefits received by these activities are not excludable. On the other side, expenditures on medicare are income transfers. Since these are the merit goods, government should provide these facilities to the people. Merit goods reflect the existence of consumption externalities and the private market mechanism fails to provide a sufficient amount.

Imperfect information in health care is more severe than any other areas. As a patient, the consumer must rely on the doctor’s judgment regarding the process of medicare because they lack medical expertise. Imperfect information decreases the effective degree of competition. In this sense, government intervention is highly required in this sector. Another important cause for government intervention in health care is related to specific egalitarianism view. Poor cannot receive adequate health care through market mechanism and should be government financed.  

Health service delivery in Nepal: existing scenario and prospective outlook:

Good health is an imperative asset for every citizen to enhance living standard. Healthy human resources are essential for country's overall development. The Interim Constitution of Nepal, 2006 has assured health as a fundamental right of the people. The main objective of the Three Year Plan (2010/11 – 2012/13) has been to increase the utilization of quality health services by ensuring availability and accessibility of health services to the citizens of all class, region and society. However, it is evidenced that the access to basic services by the poor and excluded is much lower as compared to others. Access to health services, safe drinking water and sanitation facilities is poor among people living in remote and rural areas.

Nepal’s health care delivery system has been mix of public, private, donors, NGOs and CBOs providers. The tendency of the government to focus more towards the preventive aspects and invite in the private sector for the curative aspects can be observed from the very beginning of health service delivery. The public sector is the major provider of health services in Nepal. For the poor and especially those living in relatively remote areas, the government is usually the only modern health service provider. It is estimated that around two-third of total costs of the health care is associated with the government sector, 25 per cent covered the costs of services by private facilities and another 10 per cent services provided by NGOs and by donors directly. Much of the activities of external donors and INGOs have not been reported until recently in government records. 

Some essential health services related to maternal health, child health and control of communicable diseases have been free since long time. Many items of essential drugs at Sub Health Posts and Health Posts are made free throughout the country. The effort has already been expanded to the Primary Health Centres. To establish health as a basic fundamental human right of every citizen in accordance with the Interim Constitution of Nepal and in an effort to increase the access of people to health services, registration fee has been abolished in these health facilities.

With the adoption of New Economic Policies in 1990s, the government of Nepal made free entry of private sector investment in health sector. Today, the number nursing homes operating in the private sector is very high. Private Nursing homes are well managed and quality of services has also been very high. But because of high prices, such services are out of the reach of the poor people. Society has been divided into two parts in terms of access of health care. Health care prices are rising faster than the rate of inflation.

The qualities of health care services provided particularly through the public sector have been continuously deteriorating. To improve the situation through community participation and management of health facilities have been implemented in a phased manner from 2002/2003 in selected districts.

Health service delivery in federal Nepal:

Health service delivery is one of the most important public services that governments provide. The provision of health service is typically the responsibility of sub-national governments. There are strong efficiency arguments for decentralizing the delivery of health care. It should be decentralized to local authority. The concept paper and preliminary draft report of the CA Committee on the State Restructuring and Power Sharing has proposed three tiers of governments as several federal states: central, state, and local. The responsibility of health service delivery has been assigned particularly to the state and local level governments.

The CA Committee on Natural Resources, Economic Rights and Revenue Allocation has clearly assigned the revenue sharing mechanism between three layers of government in federal Nepal. The major sources of revenue custom duty, value added tax (VAT), corporate income tax, and personal income tax which comprise around 80 per cent of total tax revenue are assigned to be collected by the central government. Excise duty has been proposed to be collected concurrently by the central and sub-national government. This shows that around 90 per cent of total tax revenue will be under the central government.

The proposed revenue sharing mechanism by the CA Committee on Natural Resources, Economic Rights and Revenue Allocation will not provide sufficient resources to the sub-national governments to health service delivery. The sub-national as well as local governments will have to depend on the central government to meet their health service delivery expenditure responsibilities.

Public expenditure on health care in Nepal

Government expenditure plays a crucial role in poverty reduction through allocative and distributive measures. Allocation of higher proportions of budget to social sectors and pro-poor programmes is important for welfare of the poor. The public sector occupies a dominant position in Nepalese economy. Although the role of private sector is increasing, many sectors like defence, police, public health and sanitation, education, roads etc are still under public sector.

Most health indicators have shown significant improvement in recent years globally. Nepal has also made satisfactory progress in many health indicators. The Twenty-year Long-term Health Plan and a Health Sector Strategy was prepared in 2002 with the objective of making essential health services universal to support poverty alleviation. The long-term vision of health sector is to support poverty alleviation by improving the health status of Nepalese people and providing equal access of health services to them through effective management system; by creating attraction towards small family by way of establishing balance between economic, social and environmental aspects; and by developing healthy, strong workforce. However, specially remote and rural communities even today are deprived from the benefits of essential health services.

Health expenditures have become a major activity of the government. The proportion of health expenditure in total public expenditure has risen in recent years. But, much of the activities of external donors and INGOs have not been reported until recently in government records.

Nepal's public expenditure composition in the health sector appears to have been directed towards curative services in recent years. In the beginning of the nineties, over three fourth of the budget allocations in health were for primary care, while only 15 per cent was earmarked for hospitals and 6 per cent and 3 per cent respectively for health policy and management, and traditional medicine. However, over the current decade most of the budget is allocated to hospitals related activities. This has led to a sharp reduction in the share of budget allocations for primary care. The allocation pattern is increasingly biased in favour of urban areas as against rural, hospitals as against primary care, and curative as against preventive interventions.

The per capita expenditure on health is also very low. There are wide disparities in health expenditure across ecological as well as development regions and districts. The percentage share of public expenditure on health has not been consistent with the percentage share of population across the ecological as well as development regions. The per capita public expenditure on health was Rs. 829, Rs. 557 and Rs. 284 in Hill, Mountain and Terai respectively in 2009/10. Similarly, the per capita government expenditure on health has not been consistent with the human development index across the ecological as well as the development regions of the country.

The expenditure of local level at VDCs and DDCs is very small in comparison to total government expenditure. The expenditures of local level is only around 5 per cent of total government expenditure ranging from 3.5 per cent in central development region to 12.4 per cent in far-western development region. The Figure also reveals that the expenditure made by VDCs is far below than DDCs. The analysis of decentralization efforts in Nepal shows that the overall level of fiscal situation at local level has been inadequate to support the development objectives of the rural people. Since many social services delivery including health care will be the primary responsibility of the local government, the share of local level expenditure and their spending capacity will have to be increased in federal Nepal. 

Conclusions

The Interim Constitution of Nepal, 2006 has assured health as a fundamental right of the people. The main objective of the Three Year Plan (2010/11 – 2012/13) has been to increase the utilization of quality health services by ensuring availability and accessibility of health services to the citizens of all class, region and society. However, it is evidenced that the access to basic services by the poor and excluded is much lower as compared to others. Access to health services, safe drinking water and sanitation facilities is poor among people living in remote and rural areas.

Health service delivery is one of the most important public services that governments provide. The provision of health service is typically the responsibility of sub-national governments. There are strong efficiency arguments for decentralizing the delivery of health care. It should be decentralized to local authority. However, the proposed revenue sharing mechanism by the CA Committee on Natural Resources, Economic Rights and Revenue Allocation will not provide sufficient resources to the sub-national governments to health service delivery.

The share of local level expenditure is very small in comparison to total government expenditure. Therefore, the share of local level expenditure and their spending capacity will have to be increased in federal Nepal to support the development objectives of the rural people including health service delivery. There are wide disparities in health expenditure across ecological as well as development regions. Therefore, equitable distribution of public expenditure on health will be necessary in federal Nepal.

(The author is a lecturer in economics at CEDA, Tribhuvan University). He can be reached at umashankarceda@gmail.com

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