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PIDE Working Papers 2007:32

Health Care Services and Government Spending in Pakistan

Muhammad Akram
International Institute of Islamic Economics International Islamic University, Islamabad


Faheem Jehangir Khan
Pakistan Institute of Development Economics, Islamabad



All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without prior permission of the author(s) and or the Pakistan Institute of Development Economics, P. O. Box 1091, Islamabad 44000.

© Pakistan Institute of Development Economics, 2007.

Pakistan Institute of Development Economics Islamabad, Pakistan E-mail: [email protected] Website: Fax: +92-51-9210886 Designed, composed, and finished at the Publications Division, PIDE.

CONTENTS Page Abstract 1. Introduction and Background 2. Literature Review 3. Policies Emphasising Health Care Services in Pakistan 3.1. Health Millennium Development Goals (2015) 3.2. Medium Term Development Framework (2005–10) 3.3. Poverty Reduction Strategy Papers 3.4. National Health Policy (Health Sector Reform) 4. Public Health Care Service Delivery in Pakistan 4.1. Access to Health Care Services 4.2. Public Sector Spending on Health Care Services 5. Research Focus Methodology Data Sources 6. Results and Discussion 7. Conclusion and Policy Implications Conclusion Policy Implications References List of Tables Table 1. Health Related Indicators (Regional Comparison) Table 2. National Medical and Health Establishments Table 3. Registered Medical and Paramedical Personnel 5 8 12 v 1 2 4 5 7 9 9 10 11 13 16 16 17 18 22 22 23 24

4 Page Table 4. Health Consultations in Past Two Weeks by Type of Health Provider Consulted Table 5. Distribution of Health Expenditure by Sub-sectors Table 6. Distribution of Government Health Expenditure by Sector and Quintile List of Figures Figure 1. Child Health Care Status and MDGs Figure 2. Maternal Health Care Status and Targets Figure 3. Total Public Sector Expenditure on Health Figure 4. Share in Total Public Sector Health Expenditure Figure 5. Public Expenditure on Health as % of GDP 11 11 14 14 15 13 15 19

ABSTRACT The study has been carried out to measure the incidence of government spending on health in Pakistan at provincial, both rural and urban level; using the primary data of the Pakistan Social Standard Living Measures Survey (PSLM), 2004-05, and by employing the three-step Benefit Incidence Approach (BIA) methodology. The paper reviews the national policies emphasising health services as well as the trend in access to and public sector spending on health care facilities in Pakistan. The study explores the inequalities in resource distribution and service provision against the government health expenditures. The rural areas of Pakistan are the more disadvantaged in the provision of the health care facilities. The expenditures in health sectors are overall regressive in rural Pakistan as well as at provincial and regional levels. Mother and Child subhead is regressive in Punjab and General Hospitals and Clinics are regressive in all provinces. Only the Preventive Measures and health facilities sub-sector is progressive in Pakistan. Public health expenditures are pro-rich in Pakistan. JEL classification: H51, H53, I11, I18, I38, O18 Keywords: Health, Expenditure, Public Policy, Gini, Concentration Coefficient, Mother and Child, Preventive Measures, Hospital and Clinics

1. INTRODUCTION AND BACKGROUND Health plays the key role in determining the human capital. Better health improves the efficiency and the productivity of the labour force, ultimately contributes the economic growth and leads to human welfare. To attain better, more skilful, efficient and productive human capital resources, governments subsidise the health care facilities for its people. In this regard, the public sector pays whole or some part of the cost of utilising health care services. The size and distribution of these in-kind transfers to health sector differs from country to country but the fundamental question is how much these expenditures are productive and effective? It very much depends on the volume and the distribution of these expenditures among the people of different areas of the country. Besides the nature of the existing circumstances of the human resource, any marginal change in public sector spending on health services may have positive impact on the human capital and economic growth. Health generates positive externalities for the society as a whole, as well as the equity concerns that without public sector financial support only the wealthy segment of the population would be able to afford reasonable health care services. Lamiraud, et al. (2005) argued that social health protection is an important instrument aiming at fair burden sharing and reducing barrier underlining access to health care services. Another good reason for the government spending in delivering basic health care services is to reduce burden of the diseases (BOD) in the productive years of the life. The social rate of return and the BOD force the policy-makers to transfer the public resources towards basic health care facilities. According to the Economic Survey of Pakistan (2005-06), the government spent 0.75 percent of GDP on health sector in order to make its population more healthy and sturdy. In this regard, a number of vertical and horizontal programmes regarding health facilities are operative in Pakistan. The federally funded vertical programmes include: Lady Health Worker Programme; Malaria Control Programme; Tuberculosis and HIV/AIDS Control Programme; National Maternal and Child Health Programme; the Expanded Programme on Immunisation; Cancer Treatment Programme; Food and Nutrition Programme, and; the Prime Minister Programme for Preventive and Control of Hepatitis A & B. To effectively address the health problems facing Pakistan, a number of policies emphasise better health care services. These include: Health related Millennium Development Goals; Medium Term Development Framework;

2 Poverty Reduction Strategy Papers; National Health Policy, and; Vision 2030. In spite of these policies, to overcome the health related problems in Pakistan seems suspicious and distrustful. The communicable diseases are still a challenge and the statistics reveal that the nutrition and reproductive health problem in communicable diseases are still liable for the 58 percent of the BOD in Pakistan. Non-communicable diseases (NCD), caused by sedentary life styles, environmental pollution, unhealthy dietary habits, smoking etc. account for almost 10 percent of the BOD in Pakistan. Social Policy Development Centre (SPDC), 2004, demonstrates that out of every 1,000 children who survive infancy, 123 die before reaching the age of five. A large proportion of those who surviving suffers from malnutrition, leading to impaired immunity and higher vulnerability to infections. Malnutrition is big problem in Pakistan. Human Conditions Report (2003) clearly points out that about 40 percent children under 5 year of age are malnutrited. About 50 percent of deaths of children under 5 years old children are due to malnutrition. Following the introduction to the research theme, Section 2 put forwards the Literature Review. Health is an integral part of the social sector and hence a number of policies emphasising better health service delivery in this area. Section 3 highlights Policy Emphasising Health Care Services followed by Public Health Care Service Delivery in Pakistan. Research methodology and data sources are discussed under Research Focus in Section 5, followed by Results and Discussion, and Conclusion and Policy Recommendations in Sections 6 and 7 respectively. 2. LITERATURE REVIEW A comprehensive review of literature, research materials, articles and evaluation reports is done to assess the existing situation and policy debate. This includes documents and reports available from World Health Organisation (WHO), United Nations Children’s Fund (UNICEF), Asian Development Bank (ADB), Centre for Poverty Reduction and Income Distribution (CRPRID), Poverty Reduction Strategy Papers (PRSP), Ministry of Health (Islamabad) and Mehbub ul Haq Human Development Centre. A large number of the studies have employed the Benefit Incidence Approach (BIA) on household data for their analysis. Findings reveal that public sector expenditures are either progressive or regressive and the share of the different income group differs depending upon the delivery of the benefits of the public expenditures across region, caste, religions, gender etc., see Christian (2002), Rasmus, et al. (2001), Younger (1999), Jorge (2001), Roberts (2003), Hyun (2006), David, et al. (2000), Gupta, et al. (1998, 2002), Lamiraud, et al. (2005), SPDC (2004), Norman (1985), Castro, et al. (2000), Hamid, et al. (2003), Sakellariou and Patrinos (2004) and Shahin (2001). The studies which

3 exhibit public sector expenditures are progressive such as Younger (1999), in Ecuador used combination of benefit and behavioural approaches showed that public expenditures improves the health indicators in the developing countries. In cross country analysis, Gupta, et al. (2002) used 56 country data and concluded that the increase in public expenditures on health reduces the mortality rates in infants and children. Study by Toor and Butt (2005) shows that socio-economic factors play an important role in determining the health care expenditure in Pakistan. The share of health expenditure in total public sector expenditure is the most significant variable affecting health status in a country. Moreover, literacy rate and GDP growth are also essential variables, which illustrate a positive relationship with health care expenditure. Other set of studies that establish the regressiveness of incidence of public sector spending such as Norman (1985) concluded that increased government expenditure on health services eventually benefits more to the upper income than the lower income groups. Castro-Leal, et al. (2000) analysed the public spending on curative care in several African countries and found that the public sector spending favours mostly the better-off rather than the poor. Hamid, et al. (2003) study covers 56 countries analysis from the period 1960– 2000 in which benefit incidence approach (BIA) was used, resulted in, on average spending on health is pro rich particularly in sub-Saharan Africa but is well targeted and progressive only in the western hemisphere. Some points need further consideration; the first point about the impact of the level of public expenditures on human capabilities is a debated point, because not all studies have found an empirical link between the two. The connection between lucratively addressing poverty issues and spending is not first and foremost a function of the percent of GDP that is committed to total spending on health and, but depends on the intra-sectoral allocation to health spending. Evidence shows that infant and child mortality rates become lowest in countries with high shares of health care spending devoted to primary (preventive) health care facilities. Second, the fiscal policy-makers meet headon the nature and magnitude of fiscal incidence. The policy choices necessitate the knowledge about which groups are prone to pay for and which groups are expected to benefit more from public sector expenditure. Policy-makers have many questions concerning how to alleviate the burden of taxation for the poor and about how to increase the efficiency and efficacy of the public sector spending on health? How to target public spending in order to improve the conditions of the poor? The incidence analysis provides some critical information to facilitate policy-makers regarding equal distribution of income and improvement of efficiency and efficacy of the public policy. Ample literature is available to understand the questions regarding the nature of incidence of the public sector expenditure in developing as well as

4 developed countries. Most of the studies have been conducted on old data-sets taken from household surveys which have not been updated. These studies are deficient in comparisons of incidence among the cross countries on one hand and in-comparability of the cross country results on the other hand. Moreover, the impact on different groups such as gender and region has not been taken into consideration in the case of Pakistan, as emphasised by Seldon and Wasylenko (1992). Nevertheless, the ...

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