Increase expenditure on healthcare services to 2.5% of GDP, say industry members

The industry is demanding an increase in the the government's expenditure on healthcare as a proportion of GDP as it is crucial for enhancing social insurance, expanding healthcare facilities in tier 2 and 3 cities, and advancing the footprint of digital healthcare services in the country.
The industry is demanding an increase in the the government's expenditure on healthcare as a proportion of GDP as it is crucial for enhancing social insurance, expanding healthcare facilities in tier 2 and 3 cities, and advancing the footprint of digital healthcare services in the country.

Summary

  • Stakeholders from India's healthcare industry have urged the government to increase its spending on healthcare to above 2.5% of the country's GDP in the upcoming Budget 2024-25, with a view to support economic growth and make healthcare services readily available for all.

New Delhi: With the country in the throes of economic development and the government racing to deliver various essential services to a burgeoning population, various stakeholders from India's healthcare services industry have urged the government to increase its public health expenditure to above 2.5% of the country's gross domestic product (GDP) in the upcoming Budget 2024-25, from 2.1% in FY23.

The investment is being sought towards strengthening the country's healthcare infrastructure and easing both demand and supply-side challenges that bog the industry down.      

“Addressing healthcare challenges will require an estimated two billion square feet of advanced healthcare infrastructure," said Abhay Soi, President, NATHEALTH and chairman and managing director of Max Healthcare Institute.

NATHEALTH, or the Healthcare Federation of India, submitted its recommendations for the Budget 2024-25 to the government on 9 July.

Elaborating on NATHEALTH's recommendations, Soi emphasized the need to increase the government's spending on healthcare as a percentage of GDP, as it is crucial for enhancing social insurance, expanding healthcare facilities in tier 2 and 3 cities, and advancing the footprint of digital healthcare services in the country. 

Also read: Minister Nadda unveils 100-day healthcare agenda: Focus on expansion of coverage under AB PM-JAY

“The upcoming budget must focus on healthcare infrastructure, innovation, skill development for medical professionals, and strengthening public-private partnerships to ensure improved access and quality across the nation. Prioritizing research and development will drive medical innovation and address emerging health challenges," he noted.

According to the Economic Survey 2022-23, the combined budgeted expenditure on healthcare by the central and state governments touched 2.1% of GDP in FY23 and 2.2% in FY22. 

Further, data from National Health Accounts (NHA) showed that the government's expenditure on healthcare as a proportion of GDP increased by 63% between 2014-15 and 2021-22.

According to country-level data maintained by the Organization for Economic Cooperation and Development (OECD), health expenditure to GDP ratio was the highest for the US at 16.6% in 2022, followed by Germany at 12.7% and France at 12.1%. The number was at 2.9% for India in 2022. 

Critical requirements

The industry's representations to the government for the Budget 2024-25 also emphasized increasing the acceptability of scheme such as Pradhan Mantri Jan Arogya Yojana (PM-JAY) and Central Government Health Scheme (CGHS) among frontline healthcare service providers in the private sector, as it will unlock the private capital of the nation and help the country achieve universal health coverage. 

PM-JAY is the world's largest health insurance scheme, which provides a coverage of 5 lakh per family per year that is fully financed by the government.

Also read: Centre sets deadlines for healthcare initiatives

Gautam Khanna, CEO of P.D. Hinduja Hospital & Medical Research Centre, Mumbai, suggests that there should be an “equivalent" scheme to provide health coverage for the middle class as well by including additional households. Such a move would offer economic protection from healthcare costs, while allocating 2.5-3.5% of the country's GDP to the healthcare sector, he noted.

According to Khanna, India’s elderly population is expected to reach a staggering 347 million by 2050, a demographic shift that can intensify the pressure on an already creaking healthcare system in the country.

A national priority

Suneeta Reddy, managing director of Apollo Hospitals Enterprises, a major hospital chain in India, also urged the government to grant the healthcare sector the ‘National Priority’ status, similar to what was done for the IT sector in the 1990s. 

“This can spur the transformation as healthier populations drive economic growth by reducing disease burden and increasing productivity. Government support can catalyze the creation of critical care facilities, ambulatory services, and home care infrastructure, elevating healthcare's GDP share to 4-5% in five years," she explained.

Various hospital chains, including Fortis and Apollo, along with the industry bodies concur on this. They believe that giving the sector the priority sector tag can help establish India as a global healthcare powerhouse. Further, policies conducive to private sector investments should also be rolled out to ensure sustained and accelerated growth, they add.

Also read: Weak public healthcare could let India’s development drive down

“The government should strengthen public-private partnerships by introducing new models and policies to boost the adoption of digital healthcare services and promote medical value travel. This can be achieved by facilitating international insurance recognition for Indian healthcare providers to attract more international patients," said Dr Ashutosh Raghuvanshi, MD and CEO of Fortis Healthcare.

Apart from increasing the allocation for healthcare services in the country's budget, industry stakeholders have also requested the government to ease the compliance burden for healthcare service providers through the use of digital tools and promote innovation in the country's medtech industry, while localizing its supply chain ecosystem. 

The industry is also advocating for a rationalization of GST on healthcare services with a uniform 5% rate and full input tax credit eligibility, which would address the issue of unused MAT credits. 

Further, industry players have also requested the government to review the health cess levied on medtech industry products to ensure affordability across income levels.

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