[Budget 2020] Misses For the Healthcare Sector

At INR 69, 000 crore for FY21, the outlay for the health sector in Union Budget 2020 is a marginal improvement over INR 62,659 crore provided in the previous Budget
[Budget 2020] Misses For the Healthcare Sector
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Co-founder and Managing Director, Cloudnine Group of Hospitals, Bengaluru
5 min read
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The Union finance minister Nirmala Sitharaman announced a slew of measures to boost healthcare sector, as part of the first full-term Budget for the second term of the current government presented.  At INR 69, 000 crore for FY21, the outlay for the health sector in Union Budget 2020 is a marginal improvement over INR 62,659 crore provided in the previous Budget.

The National Health Policy had targeted increasing the health budget to 2.5 per cent of gross domestic product (GDP) by 2025. The current health budget (Union and state together) languishes at about 1 per cent of GDP. Increasing it by 2.5 times in the next five years would require, at least a 25 per cent increase in allocations on a year-on-year basis. India’s spending stands at a little over 1 per cent of the GDP. Hence, I feel that we have a long way to go compared with other developing countries, where public healthcare spending stands at around 2 to 2.5 per cent of their GDP. At this time, however, it seems there is minimal clarity on how the government is specifically increasing its commitment to invest in healthcare to 2.5 per cent of the GDP while healthcare inflation in India is in the range of 14-16 per cent. At best, the Union Budget 2020 was a neutral outcome to the sector while the hope was for a largely positive one.

GST and Hospitals

While healthcare services are on the negative list of GST for provision of services, the basic input cost of creating such services have had an upward tax implication with GST and hence increased the overall consumer cost of such services, with the inability of healthcare services to offset such costs through input credit. Clarification in this regard would have ideally balanced the cost outcome and keep rising costs in check.

Digital Incentives are Missing in Budget 2020

With a huge focus on Internet-of-Things, machine learning, artificial intelligence and analytics, it is believed that the Budget will provide a boost to the country’s digital economy. However in my view, a digital incentivization plan is completely missing. While through last year we saw various frameworks initiated such as NDHB, guidance and adoption remains unaddressed. A budgetary guidance for furtherance and utilization can go a long way.

Lack of a Nodal Authority in India

The government is mulling a single overarching watchdog—similar to US Food and Drug Administration—to oversee functioning of three regulators of food, drugs and medical devices. The move is aimed at streamlining regulatory structure while ensuring transparency, effective monitoring as well as ease of doing business. At present, both medicines and medical devices are regulated by the Central Drugs Standard Control Organization. In the current scenario, India imports over 70 per cent of its medical device, with a fourth of them coming from the US. Medical device imports rose by 24 per cent in 2018-19. Though the intention to impose a 5 per cent health cess was to strategically redistribute such earnings to set up tier II and III healthcare facilities, it does not solve to boost the medical devices industry locally with the absence of a legitimate certification authority for such devices which would aid in use and adoption.

Preventive Healthcare

The Income-tax Act of India aims to ease the burden on the taxpayer and hence allows deductions on premiums paid for medical insurance and preventive health check-ups for the family, including spouse, children and dependent parents. However, the maximum deduction for preventive health check-up in total is INR 5,000. In my view, there is no clear plan on prevention being a key initiative to lowering health incidences and hospitalization costs. While there was an announcement of setting up 150,000 health and wellness centers by 2022, funding this through the budgetary allocation for Ayushman Bharat seems to be insufficient to meaningful achieve this initiative. The awareness about preventive healthcare and encouraging the habit of routine screening and monitoring could really reduce the burden from the entire ecosystem.

PPP Model to set up Healthcare Centers

Just as Kisan Rail through PPPs will provide a smooth supply chain for perishable food, for healthcare and hospitals the PPP model should aim to set-up healthcare centers where Ayushman Bharat has limited penetration with viability gap funding for such efforts. While this is an opportunity for private enterprises to set up services in such geographies, the funding plan is largely misty with no clear allocation or carve out. Few areas where private sector contribution can prove very beneficial include infrastructure development that is currently evenly distributed geographically. It also holds true for all levels of care, management and operations—for technical efficiency and quality. It can also help in capacity building and training. In fact a PPP model will offer equity participation where possible or extend subsidized debt and other fiscal benefits can be made available.

Decade of Nurses and Midwives with Decreased Allocations

2020 is being celebrated as the year of nurses and midwives around the world by World Health Organisation. However, the 2020 budget has decreased the allocations for the heads related to the development and improvement of nursing care. Specifically, from INR 50 crore to INR 16 crore for ‘Development of Nursing Services’; from INR 41 crore to INR 35 crore for ‘Regional Institute of Nursing and Paramedical Science’ (in Aizawl); and from INR 32 crore to zero for ‘Upgradation of Nursing Services’. Together, these cuts will be two steps back to the development plan of India’s nursing facilities and human resources, and have a bearing on the access to and quality of healthcare in the country.

Overall, this budget was perhaps an opportunity to dig deeper on improving allocation to initiatives already undertaken, a stronger direction to achieving the 2025 vision, encouraging health-tech entrepreneurship and driving more strategies towards a dedicated pool of skilled force manpower. The only rejuvenated recourse is the intent to improve healthcare access across strata and hopefully that serves well in this period, in other words an interim vision.

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