Healthcare faces significant challenges in infrastructure

Healthcare spending is expected to rise to $320 billion by 2028.
Healthcare spending is expected to rise to $320 billion by 2028.

Summary

The 2024-25 Union budget raised healthcare funding to 90,958 crore, a 2% increase

Mumbai: The healthcare industry has recommended several reforms to reduce costs of key medicines, enhance accessibility, as well as promote innovation. The industry is expecting a reduction in cancer care costs – in customs duties and GST (to 5%) on oncology radiation equipment, such as LINACs, to expand cancer treatment in underserved regions. Currently, radiotherapy machines and robotics equipment attract 37% customs duty, making them expensive. Lowering GST on health insurance premiums to 5% could improve insurance penetration, while Viability Gap Funding (VGF) and low-interest capital investments are needed to add 2.5-3 million hospital beds.

To address skill shortages, the industry has recommended increasing MBBS and postgraduate medical seats through government investment and alternative financing mechanisms. A dedicated fund to support research and development (R&D) in med-tech and pharmaceutical innovation has also been recommended. Specifically, allocating 10% of the national research fund to life sciences and reinstating 200% weighted deductions for R&D expenditures could boost innovation.

In 2018, the government launched the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY), offering 500,000 annual insurance coverage per family for secondary and tertiary care. The same year, the deduction limit for medical expenditure on critical illnesses for senior citizens was increased to 1 lakh.

Government Health Expenditure (GHE) as a share of GDP rose from 1.13% in 2014-15 to 1.84% in 2021-22. In terms of share in the General Government Expenditure (GGE), it has increased from 3.94% in 2014-15 to 6.12% in 2021-22, according to the National Health Account (NHA) estimates for 2020-21 and 2021-22. While government spending on health increased by 16.6% between 2019-20 and 2020-21, there was a sharp rise between 2020-21 and 2021-22, with a 37% increase, owing to the Covid-19 pandemic.

The 2021 budget introduced the Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMASBY) with a 64,180 crore outlay to bolster healthcare infrastructure.

In 2023-24, 89,155 crore was allocated to the Ministry of Health, a 3.4% rise, with increased funding for Ayushman Bharat but reduced allocation for the National Health Mission.

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