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NITI Aayog came out with an assessment of the States and Union Territories on their health performance in its report, Healthy States Progressive India  a few months back. It examined the overall performance of states’ as well as ranked them according to their incremental progress. The findings of the report fed into another publication, Health System Strengthening- Conditionality Report of States prepared and released by the Ministry last month. Based on the final assessment of conditionalities, performance based incentive or penalty under the NHM budget is now applicable to states.

Despite Enormous Disparity, State’s Performance a High Priority

According to the first report on Health Index, there is significant variation in states’ overall performance. The ranking of a state is based on composite index score and signifies its absolute level of performance, relative to other states. This is therefore a reflection of the cumulative effect of health system development. Kerala was ranked as the best performer for the second time with a score of 74.01; on the bottom of the list is Uttar Pradesh with a score of 28.61. Andhra Pradesh, Maharashtra, Gujarat and Punjab are the other top performing States; whereas Bihar, Odisha, Madhya Pradesh, and Uttarakhand emerged as the other bottom states.

Incremental improvement indicates the level of momentum in a state to realize health gains over the period 2015-16 to 2017-18. On the basis of Incremental progress too, states ranged from ‘not improved’, to ‘least improved’, to ‘moderately improved’, and to ‘most improved’ category. Among the Larger States, while Haryana, Rajasthan and Jharkhand were on one end of the spectrum, Bihar was at the lower most end. Haryana’s ‘most improved’ position resulted from progress not only in most health outcome indicators like Neonatal Mortality Rate, Under-5 Mortality Rate, Proportion of Low Birth Weight in newborns and Sex Ratio at Birth, but also its progress on process related indicators like vacancies of staff nurses and Medical Officers, institutional delivery, pace of fund flows etc.

Despite these stark variations, the framework of Conditionalities formed part of the budgetary approvals or Record of Proceedings (RoP) of NHM. Based on the Health System Strengthening Conditionality report, incentive or penalty was passed on to states, with the final result getting decided as per the aggregate score of each State/UT.

Conditionality Framework  

For a state, 20% of the resource envelope earmarked for it under NHM would depend on its performance on agreed conditionalities. Conditionality refers to a set of actions that states had to fulfil in order to obtain incentives.  It comprises of 7 indicators on which the states and UTs were assessed. Full Immunization Coverage was set as a qualifying criterion to be able to claim the incentives, in case of EAG, North-Eastern (NE) and Hill states, it was 75% full immunization coverage and for rest of the States and UTs it was 80%. The 7 parameters are operationalization of Health and Wellness Centres, implementing Human Resource Information System (HRIS), grading of District Hospitals, provisioning of mental health services in districts, screening of 30+ population for non- communicable diseases, rating of PHCs (rural and urban) for their functioning, and the incremental performance from the Health Index report, which was given the highest weightage.

14 states and UTs have been penalized for non-performance on certain parameters, 20 states/ UTs earned an incentive, and two states/ UTs neither earned an incentive nor got a penalty. 

-Among the seven Empowered Action Group States, two received penalty (Madhya Pradesh and Bihar), four were incentivised, one neither earned an incentive nor a penalty

-All the three hilly states (Jammu and Kashmir, Himachal Pradesh and Uttarakhand) were penalised due to non-fulfilment of conditionality

-In the North-Eastern states, five were penalised (Mizoram along with the four states that were rendered ineligible for assessment-Arunachal Pradesh, Meghalaya, Nagaland, Sikkim), while three states earned incentives

-Among the eleven Other states, two (Goa and West Bengal) received penalty and nine were incentivised.

-Among the seven Union Territories (UTs), two were penalised (Delhi and Lakshadweep), four were incentivised, one neither earned an incentive nor a penalty

Consequences and Challenges of Performance Based Budget Decisions

As part of the initiative, NHM funds for performance linked conditionalities were increased from 10 to 20 per cent of the resource envelope. A major part of the incentives was earned by States which were better performing in 2016-17 and2017-18, while the weaker states lost out on precious funds. This is more likely to have a negative effect on already lagging states, where public spending priority should lie.

Levying of ‘penalty’ would thus aggravate regional disparity further, resulting in adverse consequences for the well-being of people, as public spending on health for weaker states takes a direct hit due to this fiscal tightening.  

It is important that a process of making resource choices in complex environment of competing demands needs to be designed more carefully. A major concern with indexing of states and UTs is related to challenges involved with data sources for some of the measures. Broadly the data was used from the Sample Registration System (SRS), Central MoHFW data, National Family and Health Survey (NFHS), Civil Registration System (CRS), which is robust enough. But some of the indicators relied on Health Management Information System (HMIS), no field verification of which was carried out. Any measure can support fair comparisons only if high degree of data validity and reliability is ensured.

It is desirable that budgeting adopts an outcome orientation. To that extent, introduction of results based disbursement of funds for generating a discourse to make health a priority for all is acceptable, but it shouldn’t be taken too far. Evidence on performance budgeting resulting in improved outcomes is found to be weak; as this paper notes, many analysts believe that, as Schick (2003, p. 83) puts it, “efforts to budget on the basis of performance almost always fail.”

The Health Index report provides data on the status of flow of NHM funds in all the states. It highlights huge variations across States (and UTs) in terms of the average number of days taken to transfer the Central NHM fund to the Health society, including the staff in position which is a major factor for expending these funds.   It is hoped that the two reports lead to more intense discussions in the policy circles on these issues that play a crucial role in improving the states’ performance.

The views expressed in this piece are those of the author, and don’t necessarily reflect the position of CBGA. You can reach Happy Pant at happy@cbgaindia.org