Prioritising growth of healthcare and enabling conducive environment to boost the sector

Lalit Mistry, Partner and Co-Head-Healthcare Sector, KPMG in India shares his expectation and recommendations from Budget 2022

Prioritising growth of healthcare and enabling conducive environment to boost the sector

Taking the learnings from the COVID-19 pandemic, it vital to further investment in the country’s health sector to augment health system preparedness and overall wellbeing of the citizens. To provide the boost to the healthcare sector and to increase accessibility and affordability, the government should focus on the following key areas in Union Budget 2022-2023:

Increase public health spending: India needs to increase the public health spending this year by minimum 33 per cent to achieve the targeted 2.5 per cent of GDP by 2024-25. In 2021-22, the ministry of Health and Family Welfare was allocated around  Rs 71,269 crore, a mere increase of roughly 9 per cent from budget estimates of 2020-21, and it must be increased this year by minimum 25 to 33 per cent.

Expanding AB-PMJAY to a larger population and non-covered population: Taking the learnings from the COVID-19 pandemic, there is a dire need for mandatory health coverage for every citizen with different financing model for each fraction of the society. At least 30 per cent of the population or 40 crore individuals as per the NITI Aayog report are devoid of any financial protection for health. Towards this endeavor, AM-PMJAY budget must be expanded to include larger population and non-covered fraction of the society.

Ease in GST regulations: The inputs procured by the healthcare establishments in the form of goods, services and capital goods bear a GST duty burden, but these embedded taxes could not be set off against the output tax liability establishing a need for rationalising the GST in the healthcare sector. This will allow the free flow of input tax credits, thereby eventually reducing healthcare cost.

Incentives to invest in digital health: Under the Ayushman Bharat Digital Mission (ABDM), the Government must incentivise doctors, providers, and other digital health players with a tax rebate and/ or subsidy for investing in interoperable and standard compliant digital health solutions & infrastructure.

Improving capital funding to private sector: In May 2021, the RBI decided to banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector lending (PSL) classification to such lending  up  to  March 31, 2022. The PSL classification must be further be extended in timeline and rate of interest to push healthcare infrastructure development.

Healthcare Viability Gap Funding (VGF): To promote PPP in healthcare sector for developing hospitals, medical colleges and other healthcare services on PPP model, there is larger push required with a provision of dedicated VGF allocation under the schemes and regulatory safeguard of such PPP projects.

The healthcare budget allocation and policies have direct implications on quality of healthcare, accessibility, affordability, equity in health coverage and overall boost of the healthcare sector.