Budget for healthcare: Bring down cost to drive universal health coverage

Bhanu Prakash Kalmath S J,
Karan Kakkar
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Roping in the private sector is critical to supplement Government efforts towards ramping up the physical and digital infrastructure.

As India continues on the path of developing a robust and resilient healthcare system, expectations are high from the Union Budget for accelerating the journey towards making quality healthcare Available, Accessible and Affordable for all. Hon’ble Union Health Minister Dr. Mansukh Mandavia had highlighted priorities for the Health Working Groups under India’s G20 Presidency around health preparedness, digital health innovation and universal health coverage, and hopefully, the budget lays down provisions to advance efforts across those areas.

Enhanced budget allocation for Universal Health Coverage

India’s expenditure on public healthcare as a share of GDP is lower than most peers and significantly lower than most countries with advanced healthcare systems. Public healthcare spending needs to go up significantly from nearly 2% of GDP in 2021-22. The National Health Policy, 2017 envisages the Government’s health expenditure to be increased to 2.5% of GDP by 2025. However, to achieve Universal Health Coverage and considering the limited healthcare infrastructure and resources in rural and semi-urban areas, public healthcare spending will need to be accelerated and extended beyond the current targets.

Roping in the private sector is critical to supplement Government efforts towards ramping up the physical and digital infrastructure under the Ayushman Bharat initiatives. Considering the highly skewed distribution of healthcare resources - nearly 75% of healthcare infrastructure is in metro cities – penetration in tier-2 cities & below would require active capital deployment. Further, extending healthcare coverage to the ‘missing middle’ – comprising nearly 30% of the population devoid of any insurance coverage – would involve a contribution from both government and private sector through multifaceted intervention. Innovative public-private partnership models, beneficial tax rates on greenfield investments and weighted-tax deductions on capital expenditure can be considered to encourage the private sector. Further, measures such as income tax holidays for investments in tier 2 and below areas, and viability gap funding for setting up hospitals in smaller cities would be critical to attracting private players. The sector should also be allowed to carry forward losses and unabsorbed depreciation on mergers under section 72A of the Income Tax Act, 1961.

Reducing out-of-pocket expenditure (OOPE) on healthcare

India has a high OOPE on healthcare. While the OOPE as a share of Total Health Expenditure has declined from 64.2% in FY14 to 48.2% in FY19 led by persistent government efforts, it is still much higher than in other countries. The increase in lifestyle diseases will add to this expenditure and also put pressure on the healthcare infrastructure. We need to prioritize preventive healthcare to diagnose critical illness in the early stage and limit the strain on tertiary care. The government may consider enhancing the current limit for tax deductions of up to INR 5,000 on preventive health check-ups and exclude from the overall capping of the tax deduction on health insurance premium of INR 25,000 (INR 50,000 in case of senior citizens) under Section 80D of the Income Tax Act, 1961. Further, the overall capping may be enhanced to leave more money in the pocket of the citizens.
The wellness industry is expected to witness high growth with increasing health awareness and changing attitude towards preventive healthcare. The government’s effort towards setting up 1.5 lakh Ayushman Bharat Health and Wellness Centres are commendable. Continued thrust on AYUSH and wellness will reap financial and societal benefits in the medium- to long-term. Additionally, the allocation towards maternal and child health schemes/ programmes, particularly for vulnerable families in rural areas and economically weaker sections, should also be enhanced.

Bringing down the cost of healthcare

The sector has an inverted duty structure and input tax credit is not available on supply for healthcare services exempt from GST. This adds to the cost of healthcare which is eventually borne by the patients. The government should consider moving healthcare services to zero-rating which will ensure the availability of input tax credit and reduce the cost of said services. Further, a refund of unutilised input tax credit should also be allowed to provide additional working capital to the industry players.

Additionally, the introduction of section 194R to free medicine samples will have cost implications on the healthcare and pharmaceutical sectors. Applicability in cases where a patient is the real beneficiary when doctors pass the free samples to patients needs clarification.

Leveraging technology

Technology can help reduce the cost of healthcare by bringing in operational efficiencies and providing healthcare services to the hinterland of India. Technology adoption and implementation under the Ayushman Bharat Digital Mission by the healthcare ecosystem may be incentivised to increase the uptake. Further, provisions to promote healthtech startups would encourage innovation in healthcare which is critical for extending healthcare coverage to remote areas at affordable rates.

We are at an interesting juncture where the government is taking active steps towards addressing the gaps in the healthcare ecosystem, there is a behavioural change towards personal health, and technology is bringing a paradigm shift in delivery models. It will be interesting to see how the Union Budget imparts further momentum to the government’s healthcare agenda.

This article was originally published in The Times of India.