It is that time of the year again when the healthcare industry is left disappointed. Requests and hopes are silenced as the Finance Minister reads out the current year’s allocations and plans. This year, the experts were unanimous in pointing out that the budgetary allocation to health was abysmal and the budget included few concrete measures to improve health in the country.
Access to healthcare is critical to improving health status and good health is necessary for empowering the economy drivers of any country. We all know that our medical decisions should be made by certified medical practitioners/specialists with their patients and patients’ families’ consent. However, it is not as simple as we are forced to consider many more factors before we make those decisions. Unfortunate our medical decisions are also influenced by finances, insurance companies, religion, access to care, and especially in an election year, politics.
Throughout the world, governments have had a significant role in providing and regulating health services and their role is particularly important in developing countries with large concentration of poor. The health sector challenges in India, like those in other low- and middle-income countries, are formidable. India is home to 16.5 per cent of the world’s population and at any point of time it is estimated that there are over two million people with incurable and other chronic diseases.
 “Although the increase in allocation for healthcare is a positive move, it is certainly not enough. For the sector to make significant strides, a minimum allocation of four to five per cent of GDP is necessary.”Ameera Shah MD & CEO, Metropolis Healthcare |
“The overall priority accorded to healthcare in India is much less as compared to, say a country like US, where healthcare is an important political agenda. No one in India contests elections with healthcare as a propaganda. Understandably, since health is not a priority for developing nations. It is a failure to recognise health as an integral constituent of overall socio-economic development. The Union Budget is a reflection of this fact, with very few words on healthcare and even lesser resource allocation, laments Ameera Shah, MD & CEO, Metropolis Healthcare, Mumbai.
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The 2013 budget has come out as a step in the right direction for achieving such universal health coverage in the country by increasing funds for healthcare setups such as the six ‘AIIMS like’ institutions (Rs 1650 crores). It has also uplifted the geriatric segment with the Rs 150 crore National Programme for the Health Care of Elderly. Investing in education and research to ensure a continuous stream of medical professionals as well as innovation in healthcare will form the foundation for better patient outcomes in the long run. Some short term relief has been granted to a section of the society with RSBY being extended to more categories like sanitary workers, mine workers, taxi drivers, etc. However, some more hard hitting reforms that would have impacted the society at large would definitely have placed the nation on a much stronger footing in this vital sector. The people of India need better accessibility, affordability and quality of healthcare. Accessibility to healthcare is a major concern in rural India and needs to be addressed to curb issues such as infant and maternal mortality. Investment in primary health centres across rural India which are electronically connected with metro cities can make a difference here. Secondly, affordability – India has one of the largest out of pocket expenses in healthcare – innovative models around financing and insurance are the need of the hour. And finally quality – As I said, healthcare as a field is continuously advancing. Almost every day there are better treatments that are discovered for better patient outcomes. There should be sharing of best practices across healthcare providers, as well as incentives for healthcare product companies to transform healthcare practices through continuous medical education programmes targeted at users. There is a dire need for regulation of medical devices and standards of quality across the country which will enable the people to make an informed choice. By framing political agendas around these concerns, parties will be able to address needs of the citizens more effectively, and ensure better healthcare and better quality of life for all strata of society. Ultimately, isn’t better politics about building a better society? – Gautam Khanna, Chair, FICCI Medical Devices Forum & Executive Director-Healthcare Business, 3M India |
It is becoming increasingly evident that any nation aspiring to be at the forefront of the modern world needs to provide access to quality healthcare to all its citizens. This laudable objective would encompass three broad segments: 1) ensuring access to care for the elderly and thus in a philosophical sense recompensing the past 2) strengthening our present through programmes targeting the adult population and 3) securing the future though programmes aimed at children (reducing infant and maternal mortality rates)Allocation for healthcare
It is widely acknowledged that the health and well-being of a country’s human resource is linked to its economic progress and productivity. Yet, public spending on medical, public health, and family welfare in India is much below what is required. In 2011, the government spent a miserable one per cent of its GDP on healthcare but last year’s budget promised to hike it up to 2.5 per cent.
This year, the Finance Minister P Chidambaram earmarked Rs 37,330 crore for the healthcare sector in the next financial year 2013-14 budget, up from Rs 30,702 crore in the current fiscal, thus a rise of 22 per cent in allocation. “Of this, the new National Health Mission that combines the rural mission and the proposed urban mission will get Rs 21239 crore [Rs 212,390 million],” Chidambaram said.
Although, the industry welcomed the increases budgetary allocation to healthcare, they said it was still not enough to bring about any drastic changes.
“Although the increase in allocation for healthcare is a positive move, it is certainly not enough. As I had mentioned earlier, for the sector to make significant strides, a minimum allocation of four to five per cent of GDP is necessary,” said Shah.
 “The fact is that there are large unspent budgets in the previous years and therefore the focus now needs to be on enhancing the capacity of the government to improve the utilisation of the funds made available.”Charu Sehgal Sr. Director, Consulting, Strategy & Operations, Deloitte Touche Tohmatsu India |
“While it is encouraging to see the increased outlays, the fact is that there are large unspent budgets in the previous years and therefore the focus now needs to be on enhancing the capacity of the government to improve the utilisation of the funds made available,” added Charu Sehgal, Senior Director, Consulting, Strategy and Operations, Deloitte Touche Tohmatsu India.
More for National Health Mission
However, in his budget speech, Finance Minister, P Chidambaram, reiterated that health for all and education will remain the government’s priorities. The government is aware that it has a long way to go to reach its goals relating to investments in health. Recently, President, Pranab Mukherjee had said that the country needed ‘out of the box’ reforms to take medical services closer to people’s homes.
Incidentally, the outlay for the National Health Mission (NHM), which will now include the Rural and Urban health missions, has been increased by 24 per cent over the realised expenditure of the current year. This has been welcomed by the industry. This is mainly focussed towards the rural and underprivileged sections of the population as 70 per cent of healthcare spending in India is out of pocket and a leading cause of debt and poverty in India. It is estimated that 64 per cent of the poorest population in India become indebted every year to pay for the medical care they need.
The National Rural Health Mission (NRHM) was a rural health initiative started in 2005, to alleviate the healthcare woes of rural India. It was centred on 264 backwards districts which the government picked to improve the healthcare facilities in these places with a more pragmatic approach. This involved training locals as Accredited Social Health Activists (ASHA) and various indicators suggest that it has worked to a certain extent. Last year, the NRHM was allocated Rs 20,822 crores (increased from Rs 18,115 crores in 2011). Like the NRHM, the Rashtriya Swasthya Bima Yojana (RSBY) is mainly for the poor who can’t afford health insurance. It is a smart-card based insurance scheme for every below-poverty line (BPL) family, which allows them to get inpatient treatment up to Rs 30,000 per year. The scheme will cover the main bread earner, their spouse and three dependents. In 2012, the RSBY was allocated Rs 1097.6 crore.
 “Assuming perfect substitution between private and public spending, this increased budget outlay should reduce the out-of-pocket expenditure by around 10 per cent.”Sarang Deo Asst. Professor of Operations Management, The Indian School of Business (ISB), Hyderabad |
Explaining the impact of the increased layout on NHM, Sarang Deo, Assistant Professor of Operations Management, The Indian School of Business (ISB), Hyderabad says, “Let’s think of an ideal scenario to estimate the potential impact of this increased expenditure on the most important stakeholder: the patients. First, we need to remember that public spending accounts for roughly 30 per cent of the total healthcare expenditure in India, which is very low compared to other BRIC countries, and even our south Asian neighbours.”
“Assuming perfect substitution between private and public spending, this increased budget outlay should reduce the out-of-pocket expenditure by around 10 per cent. This is quite significant given that about five per cent of the total household expenditure is healthcare related. It is even more significant if one were to consider the rural and urban poor, who are the main targeted beneficiaries of the national health mission. Thus, in effect, increased budget outlay should act as a subsidy to these households. In fact, the picture could be rosier considering that the cost of public provision of healthcare is much lower than that in the private sector,” he further adds.
Education and research
The most positive part of this budget was when the FM announced increased outlay for medical research and education. “The added outlay of around Rs 4700 crore on medical education and research is welcome, although we need a much higher investment if we are to meet the huge demand supply gap,” said Sehgal. Last year Rs 1124 crores were given to AIIMS, and six new AIIMS-like institutions were also set up which became functional from September 2012. They were given an allocation of Rs 1,670 crores. Also the FM promised that the hospitals attached to the aforementioned colleges would be functional in the current academic year. “We are currently short of nearly one million doctors and two million nurses. The private sector’s suggestion to ease the norms for setting up private medical colleges should also have been considered and can go a long way in bridging this gap and leveraging private investment in this important area,” said Sehgal.
 “It is good to note that the budget has considered the ‘Healthcare of Elderly’ by allocating Rs 150 crore for the programme for eight regional geriatric centres, although the allocation could have been better.”Dr Sujit Chatterjee CEO, Dr LH Hiranandani Hospital |
Another positive was the allocation for elderly. “It is good to note that the budget has considered the ‘Healthcare of Elderly’ by allocating Rs 150 crore for the programme for eight regional geriatric centres, although the allocation could have been better,” said Dr Sujit Chatterjee, CEO, Dr LH Hiranandani Hospital, Mumbai. Agreeing with him, Sehgal said, “For the first time, there is a focus on the elderly, who due to a higher disease burden coupled with the absence of healthcare financing options are the worst sufferers. The setting up of eight regional geriatric centres is a good start, but this will need to be increased significantly since the number of elderly in India is expected to almost double in the next 20 years.”
 “It is disappointing to see no budget incentives extended to the fledgling primary healthcare private industry, given that the HLEG, appointed by GOI, has recommended that as much as 70 per cent of the total healthcare budget needs to be reserved for primary care.” Dr Santanu Chattopadhyay Founder & CEO, NationWide Primary Healthcare Services |
Presenting a different angle to the problem, Dr Santanu Chattopadhyay, Founder & CEO, NationWide Primary Healthcare Services, Bangalore said, “There is a crushing need for increasing the number of post- graduate training seats in family medicine and geriatric care. Without this in place, the Rs 150 crores being allocated to National Programme for Healthcare of the Elderly will just get wasted, with no skilled physicians to run the proposed regional geriatric centres.”
The industry leaders also expressed concerns on the absence of funds for the Reproductive and Child Health Project, Pulse Polio Immunisation and routine immunisation, National TB Control Programme and National Disease Control Programme. Crucial health issues such as infectious diseases, trauma care and primary healthcare are not even mentioned in the budget. “It is disappointing to see no supportive budget incentives extended to the fledgling primary healthcare private industry, given that the high-level expert group (HLEG) appointed by the Government of India, in its recent report, has recommended that as much as 70 per cent of the total healthcare budget needs to be reserved for primary care,” said Chattopadhyay.
Other neglected aspects
The demand for increase tax holidays for hospitals and other medical institutions is still not fulfilled. A tax holiday means that for a said period of time an entity will be exempted from paying taxes. This is particularly important for hospitals as they have huge investments and a very long gestation period. Insiders feel that the tax holiday period should be increased to 10 years instead of the current five. If allowed it will encourage more entrepreneurs to invest in hospitals and India will see a surge in the number of hospitals providing specialised care.
 “FM should have made provisions for incentivising the healthcare providers to create enhanced access in the Tier-II/Tier-III areas as well as in super-speciality areas like cancer care.” Pradeep Jaisingh CEO & MD, International Oncology Services |
“FM should have made provisions for incentivising the healthcare providers to create enhanced access in the Tier-II/Tier-III areas as well as in super-speciality areas like cancer care. There should be government support for private players setting up cancer centres in the under-served regions of India,” said Pradeep Jaisingh, CEO & MD, International Oncology Services.
Another area of concern is the excise duty on medical equipment and consumables. Medical professionals feel that the duty levied on medical equipment should be reduced to help bring down treatment costs, particularly of equipment that are not manufactured in India. There was no change in the excise duty levied on medical equipment this fiscal.
Infrastructure status
By far this has been the major bone of contention for the industry. The industry has been campaigning for ‘infrastructure status’ for more than a decade without success. Experts believe that infrastructure status makes it easier for that particular sector to grow because it gets a lot of government subsidies. Currently, sectors like construction, electricity generation, transmission and distribution, gas generation and distribution through pipes, water works and supply, non-conventional energy generation and distribution, railway tracks, signalling system and stations, roads and bridges, runaways and other airport facilities, telephone lines and telecommunications network, waterways, canal networks for irrigation and sanitation and sewerage, etc., have received infrastructure status. This allows them to pay lower interest rates on loans, pay lesser taxes and increased funds for setting up projects. Infrastructure status would allow people to set up more hospitals and labs, hire more doctors and also allow foreign direct investment (FDI) in healthcare. It would also ease up the process of setting up standard medical education and increase public-private partnership (PPP) in the healthcare sector. However, this seems like a distant dream for the healthcare sector in India.
Increased surcharge on profits
The government has increased surcharges on profits before tax from five per cent to 10 per cent, which will raise the costs of providing healthcare for hospitals and doctors who practise independently. “The increase in surcharge from five to 10 per cent and increase in royalty rates of tax from 10 to 25 per cent (subject to double tax treaty relief) will impact the sector negatively,” says Hitesh Sharma, Partner & National Leader – Life Sciences, Ernst & Young. “Most demands of the sector like tax holiday period increase for healthcare, GST roll out, service tax exemption for clinical trials activity, etc. have not been addressed in the budget,” he added.
“One would have wanted to see some policy measures that could have enhanced the absorptive capacity of the sector to utilise this additional expenditure. Else, we might end this financial year with a revised estimate that is an even smaller fraction of the budgeted expenditure,” concludes Deo. With some positives and some not-so-positive recommendations the budget this year has received a mixed reaction from the industry. Only time will tell if all the allocated money will be utilised as intended.
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