Budget Series 2018-19 : #4 Impact on Healthcare Sector

By TJEF Editor Gandhali Inamdar

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The Union Budget 2018-19 has provided a big opportunity to the entire Healthcare industry and allied services to address the healthcare needs of a large population of the country. As envisioned under the National Health Policy 2017, the Union Budget 2018–19 has taken a long stride towards Universal Health Coverage, with focus on increasing the health coverage for the underprivileged and the bottom-of-pyramid section of the society. This budget is in line with industry expectations of an increase in insurance coverage, especially for those below the poverty line.

Under the cover of ‘Ayushmaan Bharat’, the government has announced measures to holistically cover primary, secondary and tertiary care services. The National Health Protection Scheme is at the forefront of this programme. This scheme will cover 10 crore families with an annual coverage of 5 lakh per family. This is a significant increase from the coverage under the ‘Rashtriya Swastha Bima Yojana’, which benefits 45-50 crore families by providing access to secondary and tertiary care services. The proposal of setting up 1.5 lakh health and wellness centres will bring primary health care to every household by providing essential drugs and diagnostics free of cost. By increasing government support and coverage, this will boost demand for medical services in the country, giving an opportunity to healthcare providers and insurance companies to partner with the government. It will also reduce the financial and mental burden of healthcare costs on the less privileged. Reduction in household Out-of-Pocket (OOP) expenditure on healthcare will lead to increased disposable income which with time will give an impetus to the economy. Support for Tuberculosis (TB) patients during the period of treatment will further lead to increase in demand for nutritional supplements and is a welcome step to ensure a TB-free India.

The budget also proposes steps to address the shortage of qualified medical personnel. It propagates setting up of at least one medical college for three parliamentary constituencies and one Government college per state. Further, 24 new government medical colleges and hospitals will be established by upgrading existing district hospitals. This will further enhance quality and accessibility of medical education and healthcare. Amidst all the initiatives, more clarity is required regarding the breakdown of allocated Budget and a roadmap to implement these plans. Convergence with existing government schemes needs to be considered to reduce hurdles during implementation. Barring the announced efforts to increase medical colleges, more efforts are required to reduce the existing manpower and skill gap. There was also no mention of measures to support investment and collaboration with technology to upgrade the quality of care. The government needs to incentivise healthcare providers to imbibe technology and digitise the healthcare sector.

India has been long lagging in its expenditure on health at a global level, the Union Budget 2018 does help in increasing it from 1.5% to 2.5% of GDP, the first positive step on a long path for healthy India. Implementing these measures on the envisioned scale will require close coordination of the centre, state, and districts with healthcare and insurance providers. Even with good intentions, there is need to ensure adequate quality measures are adopted and adhered to.

Financial Spending on Healthcare and its impact on the economy

– By Phani Kumar

“One of the factors a country’s economy depends on is human capital. If you don’t provide citizens with adequate access to healthcare, education and employment, you lose at least half of your potential. So, gender equality, empowerment and healthcare bring huge economic benefits.” – Michelle Bachelet

Healthcare plays crucial role in every country’s economy. Developed countries like America and France lay high emphasis on healthcare spending. Global average of financial spending on healthcare is 6% of GDP, whereas government spending in Indian healthcare sector is 1.3% of GDP. China’s expenditure on healthcare is 3.1% and the United States spends 8.3% of GDP. This shows the importance needed to be given for healthcare by emerging economies.

Holistically, healthcare means hospitals, pharmaceutical, diagnostics, medical equipment & supplies, medical insurance and telemedicine. At present, India has 0.7 doctors and 1.1 beds for every 1000 citizens. It implies that there is a lot of under-development in the Indian hospitals. Recent incidents in Uttar Pradesh government hospital portray the alarming situation of government hospitals. This shows that there is an urgent need for increase in financial spending on healthcare.

Average hospitalization costs increased 11% CAGR in last ten years but mortality rate remains high. It shows the increasing difference in quality of treatment of patients between private and public hospitals. Thus, there is an immediate necessity for the government to increase spending on hospitals and healthcare. It must increase the budget allocation from $4.5 billion to $10 billion in the coming years keeping in view the population growth of the country.

Pharmaceuticals in India are facing headwinds because of strict US FDA norms. There should be stricter government regulations to deal with issues of generic products. It boosts exports and improves country’s GDP. Proper regulations on generic products improve quality and will help in achieving the target of $50 billion exports by 2020.

Recent IPOs from diagnostic and insurance companies will provide necessary capital for their capex plans. This would help them expand into tier 3 cities and towns. SEBI support is necessary for further listing of companies from these segments.

Telemedicine is the next big thing in healthcare sector. At present, telemedicine has a $15 million market. It is expected to grow at a CAGR of 20% during FY 16-20. Proper support from government in PPPs can help the sector reach $32 million market by 2020.

100% FDI, National Health Policy 2017, incentives in the medical travel industry, tax incentives and encouraging investments in rural areas are future growth drivers in Indian health care industry.

Implementation of social insurance policies for people below poverty line and increase in allocation of government budget will improve health conditions of citizens in emerging nations. This, in turn will improve productivity of the people and increase their contribution to the economy.

Proper attention by government (of countries like India) on Telemedicine and Pharma sector will increase their contribution to export % of the country’s GDP.