Efficiency Frontier Analysis of Indian States for Achievement of Better Health Status

Presenter: Riya Dhawan, National Health Systems Resource Centre,New Delhi

Abstract

Rationale: National Rural Health Mission (NRHM), launched in 2005 by the Government of India to carry out necessary architectural correction in the basic health care delivery system in the country, aims at raising public financing of health sector from present level of around one percent of GDP to 2-3% of GDP by 2012. The financial support from the central government to the states/provinces is directed at systems strengthening to increase the capacity of the states to raise the population health indicators.

Objective: The objective of the paper is to identify the most efficient states/provinces in the country with respect to IMR and MMR so that the central government can direct appropriate fiscal incentives to states as per their performance.

Methodology: Since the NRHM sees the IMR and MMR reduction as its primary performance indicators, these are used to know how the states are performing with respect to their expenditure. Efficiency is estimated as the distance between input-output combinations and an efficiency frontier (defined as the maximum attainable output for a given level of inputs). Efficiency in the health sectors of different states of India with respect to the public expenditure is analyzed with the help of an efficiency frontier. This frontier is constructed with the help of Data Envelopment Analysis (DEA) techniques.

Discussion & Conclusion: Under Data Envelopment Analysis, since Bihar turns out to be more efficient than Karnataka, we are compelled to probe further into the issue as this was counterintuitive. While Bihar is definitely doing well for the amount of money it is investing in health, we probe into the question whether different health indicators behave non-linearly with respect to the amount invested in health. This probe leads us to conclude that poor governance seems to be a stronger determinant of population health outcomes as opposed to the absolute amount of financial resource allocation.