A tale of healthcare

Sri Lanka has run out of hospital beds with the military scrambling to outfit a factory into a makeshift space as reports roll in of over 4,000 COVID-19 positive patients awaiting space at a treatment facility. While the pandemic has strained healthcare systems to breaking points around the world it is worth looking at how Sri Lanka ended up here. 

Sri Lanka has a much-lauded universal healthcare system. But over the decades successive governments have struggled to manage allocations. Sri Lanka’s total expenditure on healthcare, both public and private, is 3.9% of GDP, similar to lower middle-income countries’ health expenditure of 4%, but lower than upper middle-income countries’ health expenditure of 5.9%.

In terms of public health expenditure, it is a low 1.6% of GDP, Sri Lanka compares favourably with regional peers in South Asia (0.9% of GDP) and lower middle-income countries (1.3%) but spends just half the level of upper middle-income countries (3.2%). 

Over time, Sri Lanka’s health expenditure has declined from 2.3% of GDP in the year 2000 to 1.6% of GDP in 2016. However, public expenditure on healthcare has increased in recent years with a 34% increase of actual spending in real terms (inflation adjusted) between 2013 and 2016. Public health expenditure budgets achieved, on average, 92% execution during this period, according to a report released in 2019 by UNICEF. 

Domestic sources of financing dominate public health expenditures. Between 2013 and 2019, domestic sources accounted for, on average, 94% of public health spending with foreign sources accounting for the balance 6%. Annual disbursements of Official Development Assistance (ODA) dedicated to health have declined significantly from $ 773.6 million in 2012 to $ 85.1 million in 2018.

As a share of total health expenditure, private health expenditure has been increasing in Sri Lanka from 45% in 2000 to 56% in 2016 with out-of-pocket expenditure being the largest contributor to private health expenditure. 

Most of the public health expenditure in Sri Lanka is recurrent spending, averaging 78% between 2013 and 2018. Capital expenditure is largely focused on hospital development. At the Provincial Council (PC) level, the ratio of recurrent expenditure has been higher at 94%. Overall healthcare expenditure is relatively centralised with 73% of expenditure taking place at the central government level.

Provincial allocations of health expenditure are highest in per capita terms in the Northern and Uva Provinces, two of the more economically backward and impoverished regions in the country. The Western Province, the wealthiest province in Sri Lanka, receives the lowest per capita provincial health allocation. Therefore, decentralised public health expenditure is aligned with equity objectives. 

But with the shift towards private funded healthcare, the nation’s private hospitals added new beds at a compound annual growth rate (CAGR) of 21% over the period 2010-14, compared to just 10% at public sector facilities, according to a report compiled by Fitch Ratings. 

COVID-19 has pushed this evolution into stark focus as the resource gaps of the public healthcare system are brought to the forefront by the third wave. Shortcomings of the local healthcare system have been highlighted over many years as experts have warned it will be strained by the country’s rapidly aging population. However, different infrastructure projects were focused on by governments and remain a priority despite the clear and immediate need. Citizens need to ensure that these issues are addressed so more people do not pay for them with their lives.