Address India's growing healthcare costs

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Address India's growing healthcare costs

Sunday, 28 January 2018 | Arvind lal

The Indian healthcare sector needs to adopt innovative measures to reduce the overall cost of services. Promotion of health insurance, digital healthcare including IT-based solutions and quality asset management can reduce out-of-pocket expenditure considerably

India aspires to provide quality and affordable healthcare to all. Challenges are many, which range from a rise in diseases, both communicable and non-communicable, to maintaining quality access and affordability, health infrastructure, financing, rational pricing of essential devices, trust deficit, policies and regulatory framework. The National Health Policy (NHP) of 2017 envisages Universal Health Coverage (UHC) for all. However, high cost of medical services is ailing this sector and we need to address this challenge.

Approximately 63 million people fall into poverty each year due to lack of financial protection for healthcare needs. With a 22 per cent shortage of primary health centres and 32 per cent shortage of community health centres, it is estimated that 50 per cent of beneficiaries travel more than 100 kms to access quality care. India has only 1.1 beds per 1,000 population in India, compared to the world average of 2.7. Out of pocket expenditure constitutes more than 60 per cent of all health expenses, a major drawback in India where a large segment of the population is below the poverty line. Reducing cost of healthcare services needs to be given top priority if the country aims to achieve UHC by 2030. 

India needs a holistic and balanced approach to bring down the cost of healthcare services through rational policies, health schemes, innovations and solutions. Apart from price control measures, we need to explore other mechanisms to ensure affordable services through overall asset management by taking innovative ‘digital health’ initiatives and systematically focusing on ‘prevention and wellness’.

Make health insurance mandatory: Currently, only around four per cent of the country’s population has health insurance coverage. This has essentially led to a situation where out of pocket healthcare spending constitutes 86 per cent of total healthcare spends. The reason for the low penetration of health insurance is because currently, it is optional. While the Government has taken laudable steps to introduce health insurance scheme for economically weaker sections of the society and senior citizens in the last Budget, it can also explore making health insurance coverage mandatory for all citizens in a phased manner, initially covering the organised sector.  

Role of technology: NHP 2017 envisages UHC and recognises the criticality and importance of technology in driving the growth of this sector. The Med Tech sector plays critical role in achieving UHC with high spending in R&D and innovations in order to provide quality and safety in patient care. To help encourage domestic manufacture of MRI devices, as a part of the ‘Make in India’ strategy and make technology more accessible and affordable, there is a need to lower the existing rate of customs duty as it would take around 2-3 years for domestic manufacturers to introduce this technology to India, given the need for investments. It is also important to create an environment supportive of domestic manufacture of essential items, but care must be taken to import high-tech medical equipment, like linear Accelerator, PET-CT, MRI, heavy duty blood testing automated analysers and their reagents, at nominal rate of import duty so that high quality diagnostics and treatment are available to the masses at affordable prices.

Engaging private sector network’s capacity: Given the enormity of the challenge, there needs to be a way forward to fully engage entire private network’s capacity, skill and knowledge. The private sector can play an effective role in supporting this endeavour. While unethical profiteering is deplorable, it has been proved that new solutions and innovations offer enough scope for the private sector to cut down prices to a reasonable level, which can help achieve accessibility and affordability without compromising on the minimum standards of quality. For the private sector, cost of service delivery has gone up several times. However, with proper asset management, activity-based costing and new IT-driven solutions in admission, transfer and discharge and focus on other areas can bring in the desired reduction in costs.

The GST factor: The sale of healthcare equipment, devices and services to healthcare service providers, such as hospitals and diagnostic clinics, is chargeable to indirect taxes. However, the final sale of patient care /diagnostic services by the hospitals/clinics  is exempt from indirect taxes (such as VAT and service tax). This results in accumulation of indirect taxes at the level of hospitals and clinics. Since healthcare providers are unable to pass on these taxes to their final consumer — the patient, they will have no option but to bake these taxes into their fees/charges that they charge to the patient. This will lead to an increase in healthcare costs for the patient. Hence, it is recommended that the GST on sale of healthcare equipment/devices, healthcare insurance and other services be put under 0 to five per cent slab and the process to avail input credit should also be simplified. Currently, products and services offered by the healthcare sector mostly fall under the 12 per cent or 18 per cent GST slab.

(The writer is president, NATHEAlTH)

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