The discourse on building strong public health systems tends to start with financing. Indeed, according to the World Bank, the per capita public spending on universal health coverage in low- and middle-income countries (LMICs) — including government expenditure and off-budget development assistance — is about half of the minimum benchmarks. As a share of gross domestic product (GDP), the health expenditure gap between LMICs and high-income countries narrowed from 2.05 percentage points in 2000 to 1.68 percentage points in 2023. While it may seem that LMICs are “catching up”, recent World Health Organization data show that in per capita terms the gap has in fact expanded more than three-fold during this period.
Health aid under pressure
Over the years, “development assistance for health” (DAH) has played a critical role in supplementing national budgets in LMICs with the amount of such aid peaking in 2021 during the COVID-19 pandemic. However, the trend of increasing DAH reversed sharply post the pandemic. Further, in early 2025, the United States, a country that has historically contributed over a third of all DAH globally per year, announced cuts to the tune of 67% to its foreign assistance programme. The United Kingdom, France, and Germany followed suit, with cuts of 39%, 35%, and 12%, respectively. As per the Organisation for Economic Co-operation and Development (OECD), health funding could drop by up to 60% from its 2022 peak.
At the same time, national budgets are strained due to rising public debt and its costs. Global public debt reached a record figure of $102 trillion in 2024, with developing countries accounting for $31 trillion of this total. Since 2010, the public debt of developing countries has grown twice as fast as that of advanced countries. In 2024, according to UN Trade and Development (UNCTAD), developing countries paid a record $921 billion in net interest payments in public debt leaving less for other needs including health.
With public sources drying up, it is unlikely that more money will flow into health systems anytime soon and the way forward may be to spend available money better. There are three broad ways to make public health spending go further.
The first is to spend what is allocated. The World Bank reports that health budgets in LMICs are executed at around 85%-90%, rates that are lower than that for the general budget and for education. This effectively means that there is a deprioritisation of health at the implementation stage of budgets. In India, a parliamentary panel found that only about two-thirds of the allocation for the flagship health infrastructure mission was spent in 2024-25. Within the National Health Mission (NHM), the picture is worse: just 26% of the money earmarked for communicable and non-communicable disease programmes was actually used that year.
The right health investments
The second is to spend on the right things. Budget execution varies across expenditure categories. While wages and salary budgets tend to be implemented in full, there is underspending on goods and services. As a result, workers are not well-equipped to deliver quality health care. More broadly, there is a choice to be made in terms of the tiers of health care that are prioritised in public spending. A lot of the money goes to curative care at the secondary and tertiary levels — at the cost of preventive, primary health care. According to estimates from the London School of Hygiene & Tropical Medicine, India spends less than one-fourth of public health money on preventive care.
Purely from a health impact viewpoint, public health money is best spent on classic public goods such as infectious disease control or sanitation, where there is a ‘market failure’ — rather than on the expansion of relatively cheap curative health services (for instance, treating common illnesses) that the private sector is already supplying competitively. Recent evidence bears this out: public health spending markedly improves infectious disease outcomes, through greater access, vaccination, and sanitation, but does far less for maternal and child health or non-communicable diseases, making a strong case for strategic allocation. As populations age, more will need to be done for chronic conditions in terms of addressing risk factors, early detection, and management.
Better governance, better health
The third is to improve governance and operational efficiency. Good governance is key: if corruption is reduced or the quality of bureaucracy improves, countries see greater positive effects of public health spending on desired health outcomes, such as child mortality. The converse also holds: simply increasing spending where governance is weak is unlikely to improve outcomes. Moreover, with the increasing decentralisation of public service delivery, it is becoming imperative to focus on improving governance at the subnational level.
Within governance, there is a crucial role for public finance management. While a well-formulated budget is a good starting point, impact will only be achieved if the budget is implemented efficiently. There is a need to improve budget credibility and cash disbursement. Involvement of public health providers in budget processes can enhance both their accountability and motivation. Improving procurement processes can help achieve greater value for money in health sector resources. As the pandemic has taught us, budgets should be flexible to respond to unforeseen circumstances.
That said, the case for enhanced spending remains: its returns are greatest precisely where health outcomes are poorest; hence, money that is well-directed can help narrow gaps across countries.
Nalini Gulati is Editorial Adviser at ‘Ideas for India’. Vikas Dimble works at the Isaac Centre for Public Policy (ICPP), Ashoka University. Both writers co-author ‘The Care Gap’, a living literature review supported by Coefficient Giving
Published – August 03, 2026 12:48 am IST
