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American Nudge:HEALTH CARE REFORMS VITAL , by Dr P K Vasudeva, 29 March 2010 Print E-mail

Events & Issues

New Delhi, 29 March 2010

American Nudge


HEALTH CARE REFORMS VITAL

 

By Dr P K Vasudeva

 

Today President Barack Obama is the happiest person. His election campaign promise of providing health care to all deserving has been fulfilled with the historic health care legislation seeing the light of day through a slender margin victory for the Democrats. The legislation will extend insurance cover to another 34 million uninsured (economically poor).

 

Obama is the first American President who has moved the country closer to a comprehensive health cover for a large swathe of the population. Among other things, the legislation puts the pressure on insurers into taking all customers, regardless of pre-existing conditions and imposes stricter limits on spending for medical treatment in a bid to cut costs. The two bills cleared will cost the exchequer some $940 billion over 10 years. A new tax on the highest earners, fees from healthcare companies and savings in Medicare bills could offset part of the cost.

 

Indeed, this could be a great incentive for India to bring in similar legislation to alleviate the sufferings of the large morbid and malnourished population of the country. Materially pharmaceutical firms, IT and business outsourcing industries could reasonably expect to gain. Since the focus will now be on cost cutting to retain profit margins, American healthcare companies will look to outsourcing a good deal of the business such as medical health records that will need to be created for the 34 million new beneficiaries. For the pharma industry, the increased coverage and lower cost bodes well for their generic products but they can expect stiff competition from multi-national drug firms that have already entered the generic market in anticipation of a policy accent on low-cost medicine. For the policymaker, the Obama reform is an intangible but important takeaway.

 

According to a report by Technopak Advisors, healthcare, a $35 billion industry in India is expected to cross the double mark-- $75 billion by 2012 and $150 billion by 2017. However, India is yet to measure up to international standards of domestic healthcare. A majority of citizens still struggle for access to primary healthcare, and diseases such as malaria and cholera continue to kill. Other challenges include inadequate affordable healthcare infrastructure, especially in the rural areas.

 

After 60 years of Independence, the country has a paltry health insurance cover for just three per cent of the population, all of which are either in government service or employed in the organised industry. And, while the National Rural Health Mission (NHRM) is a commendable improvement on earlier health care programmes, it basically focuses on specific illnesses and diseases and the creation of medical infrastructure for delivery. Missing for over 95 per cent of Indians is the benefit of a subsidised universal health cover and that is indeed shocking for a nation that prides itself on its rapid rise to prosperity and expecting double digit economic growth in the next two years.

 

A health insurance scheme for the poor will involve huge public spending and New Delhi may plead concern for the fiscal deficit. Obama has taxed the super-rich to partly neutralise the cost. India can leverage its global standing and strengths to create revenues for the benefit of the needy through a Tobin-type tax on capital flows. This could be a major step for inclusive growth for which the country is making all out efforts to ensure that the poor get their due.

 

According to healthcare industry representatives, if the Centre seriously wants to tackle the affordability or accessibility concern on healthcare, it needs to bring in dramatic reforms along with increasing its spending. The Union Budget for 2010-11 saw the healthcare allocation increase of Rs 2700 crore from the previous fiscal, with a specific focus on rural areas. However, this allocation is not enough to take care of the 1.25-billion population. The Centre has drawn flak from several quarters in the past on its low spending on healthcare, a little over one per cent. The commitment is that it would spend about two per cent of GDP this fiscal. 

 

Our public expenditure on healthcare is still one per cent of the GDP, while the private sector contributes 4.5 per cent. Can a rapidly developing economy like ours be so dominantly dependent on private spending? It is, therefore, expected that the health expenditure rate will mirror the GDP growth of 7-8 per cent and the Government will increase the spending to two per cent of the GDP.

 

For years now, the healthcare industry has been asking for infrastructure status in the background of the Centre spending as little as it does. And, the government needs to at least facilitate private healthcare providers to grow and could make policies to govern these institutions, other than demanding that these ensure affordable healthcare.

 

If the gap between the need for healthcare and the existing infrastructure is not bridged and if the shortfall in the next-generation healthcare and medical manpower is not addressed, then obviously people in the healthcare industry have a reason to worry -- that the country is sitting on a mega health challenge. The industry estimates that by 2025 an estimated 189 million people in the country will be over 60 years of age and requiring higher healthcare spending.

 

India has 16 per cent of the world's population, 18 per cent of the world's mortality and 20 per cent of the world's morbidity as per industry estimates. The Centre needs to drive efficiencies in the system and if necessary go all out for public-private partnerships. At the same time, preventive healthcare too needs a huge thrust. On the geographical skew of hospitals being largely in big cities, the Centre could consider offering a 10-year tax holiday, if that is what it would take to get the private players into the smaller cities.

 

Additionally, all the talk on traditional medicine in the country should be promoted as an alternate system. As developed countries seem to take more to alternate systems such as meditation or yoga, the Centre needs to encourage and incentivise the adoption of these systems in India, as well. The Patanjali Yoga Centre of Swami Ramdev is contributing a lot by providing affordable Ayurvedic medicines and concentrating on yoga, pranayam and meditation that needs to be encouraged by the government.

 

This apart, a number of other measures could be adopted: hospitals attracting and treating foreign patients should be given tax benefits. Concessional funding, tax benefits or subsidies should be provided for starting new hospitals in tier-II and tier-III towns. Hospitals that improve service quality and get national and international accreditation should receive tax benefits. Individuals taking health insurance should also receive tax incentives. The tax deduction limit on medical expenditure should be raised. Private players should be encouraged to manage government hospitals and selectively use them for teaching purposes.

 

The Government should provide guarantee on loans taken by healthcare groups investing in health education and creating skilled pool of health and nursing assistants, hospital equipment maintenance and hospital housekeeping services among the poorer sections. Above all, if there is a will there will be a way for a healthier India. ---INFA

 

(Copyright, India News and Feature Alliance)

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