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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