Strong Health Systems Through Public Spending: UPSC Mains Notes

UPSC Mains GS Paper II Health & Governance

Strong Health Systems Through Public Spending

Global health financing faces a sharp reversal as aid cuts and inefficient public spending threaten universal health coverage in developing nations
US Aid Cut
67% reduction (2025)
NHM Spending Gap
Only ⅔ of allocation used
OECD Funding Drop
Up to 60% from 2022 peak
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Global Health Financing: Context and Background

  • Per capita public spending on Universal Health Coverage (UHC) in low- and middle-income countries (LMICs) is about half of minimum benchmarks.
  • The health expenditure gap between LMICs and high-income countries has expanded three-fold in per capita terms since 2000.
  • Development assistance for health (DAH) peaked in 2021 during COVID-19 and has sharply reversed since.
  • The US announced 67% cuts to foreign assistance in early 2025; the UK, France and Germany followed with cuts of 39%, 35% and 12% respectively.
  • The OECD estimates that health funding could drop by up to 60% from its 2022 peak.
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Spend What Is Allocated

  • Budget Under-execution: Health budgets in LMICs are executed at only 85–90% of allocation.
  • India’s NHM Gap: Only two-thirds of the National Health Mission flagship allocation was spent in 2024–25.
  • Disease Programme Lapse: Only 26% of money earmarked for communicable and non-communicable disease programmes was actually used.
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Persistent underspending on health budgets — even where funds are allocated — means the gap between policy intent and ground-level delivery remains one of the biggest drags on health outcomes in LMICs, including India.
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Spend on the Right Things

Goods & Services Gap

Wages are fully implemented, but spending on goods and services faces persistent underspending, leaving frontline workers ill-equipped.

Preventive Care Neglect

India spends less than one-fourth of public health money on preventive care, per London School of Hygiene estimates.

Market Failure Focus

Public money is best spent on infectious disease control and sanitation — areas where private markets fail to deliver.

NCD Mismatch

Public spending does far less for maternal, child health and non-communicable diseases, suggesting a need for strategic reallocation.

Public health spending markedly improves infectious disease outcomes through vaccination, access and sanitation — but the same returns are not matched for chronic and non-communicable disease burden.
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Improve Governance and Efficiency

  • Governance Dividend: Reducing corruption or improving bureaucracy quality leads to greater positive impact of health spending.
  • Spending Without Governance: Simply increasing spending where governance is weak is unlikely to improve health outcomes.
  • Subnational Governance: Increasing decentralisation makes improving subnational governance capacity critically important.
  • Budget Credibility: Improving cash disbursement efficiency and procurement processes achieves greater value for money.
  • Provider Participation: Involving public health providers in budget processes enhances both accountability and motivation.
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Challenges in Health Financing

Aid Reversal

Sharp cuts in development assistance for health leave LMICs with reduced supplemental financing for health systems.

Debt Burden

Rising public debt reduces fiscal space for health investment in developing countries.

Curative Bias

Excessive focus on secondary and tertiary curative care comes at the cost of preventive health.

Weak Governance

Corruption and bureaucratic inefficiency significantly reduce the returns on health spending.

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Way Forward for Efficient Health Spending

Budget Execution
Strengthen systems to fully execute health budget allocations, especially for goods and services.
Preventive Priority
Shift public spending toward preventive and primary care where market failures are most pronounced.
Governance Reform
Reduce corruption and improve bureaucratic quality to maximise returns on existing health spending.
Subnational Focus
Strengthen subnational governance capacity given increasing decentralisation of health delivery.
Flexible Budgets
Build pandemic-ready flexible budgets that can respond to unforeseen health emergencies quickly.
Strategic Allocation
Direct spending toward public goods with the greatest returns — infectious disease control, sanitation and vaccination.
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Source: The Hindu

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