February 28, 2010

Mixed reaction to Union Budget by healthcare sector

The Union Budget 2010 has been bullish for the healthcare sector. The government increased the outlay to the healthcare sector to Rs. 22,300 crore from Rs. 19,534 crore.

Vishal Bali, CEO, Fortis Hospitals, said that in a budget that provides 46% of plan allocation for infrastructure, not finding healthcare on the agenda of the finance minister takes another year away in bridging the affordability and accessibility gap in the sector. An increase of 14% in the overall outlay for the Health Ministry does not really pave the way for a 1-2% increase in GDP spend by the government on healthcare.

The annual rural health survey for effective spend under the NRHM scheme and the convergence of NREGA with wider health insurance coverage through Rashtriya Swasth Bima Yojana is an innovative step to increase healthcare cover for rural India. The only positive step to help indigenous manufacture of consumables and implants is the import duty waiver for manufacture of orthopaedic implants. It is ironical that the budget provides for investment linked deductions to the tourism sector but does not provide for any impetus for investments made in setting up new hospitals. The call to reform the Indian Healthcare Agenda goes unanswered again in Budget 2010, Bali said.

According to Dr. Amit Varma, president-Healthcare Initiatives, Religare Enterprises Ltd, the increased assistance to the healthcare sector to Rs. 22,300 crore which is 2% of total outlay, up 14% from 2009-2010 and is in line with the increase last year. Because of capacity constraints in public sector, we expect a large part of this investment to be absorbed by the non-government and private healthcare sector. Health Insurance has also been extended to more than 20% of the Indian population that is covered by the NREGA (National Rural employment Guarantee Act) program. This figure represent a potential 200% increase in the penetration of health insurance in India from the current figure of 5% and the move is expected to have a direct positive impact on the demand and quality of healthcare services and the health insurance sector in India. However, there is no mention of categorizing healthcare as an infrastructure service or of any concessions to increase private sector participation and investment in healthcare infrastructure in India, which is disappointing.

According to Rajen Padukone, CEO, Manipal Health Systems, there has been a comprehensive support to revitalize healthcare sector. It is a well balanced budget. Continuing focus on strengthening and supporting the infrastructure sectors, including healthcare should maintain the economy on the growth path. Relaxation of FDI norms may see more international players coming in to India in the healthcare sector. Extension of tax benefits on Contribution to CGH Scheme will improve the contributions to CGHS. This will improve the operation of CGH Scheme substantially.

Rationalization of the duties on medical equipment will make imports cheaper and cost of healthcare delivery to be lower (Uniform concessional basic duty of 5% and CVD of 4% and full exemption of additional duty on all medical equipment). Orthopaedic implants will be cheaper (specified inputs to manufacture orthopaedics implants exempted from import duty). However, we will have to study the impact on the reduction of prices of drugs (reduction in excise duty from 16% to 10% on the goods mentioned in Medicinal and Toilet Preparations Act), Padukone said.

The subsidies on life saving medical equipments and in critical care areas will help hospitals in adopting the technological advances and help save lives. The tax exemption given to only medical equipments could have been extended to laboratories and medical research as well. High-end expensive critical care medicines should also have been considered for tax relief. Further, the concessions should have been considered for allocation for the implementation of software for health care management systems across the country for better healthcare delivery system, said Dr. N. K. Venkataramana, vice-chairman and Neurosurgeon, BGS Global Hospitals.

While the overall Budget is commendable, healthcare was touched upon in the plan allocation for health and family welfare increase pegged at Rs 22,300 crore, up from Rs 19,534 crore. Healthcare has major challenges in combating the three diseases that plague Indians heart disease, diabetes and cancer. The country need a planned intervention in enabling our health system to reverse the ill effects of these diseases, said Dr Pratap C Reddy, chairman, Apollo Hospitals group.

Other significant challenges include severe shortage of health infrastructure and health human resources. “We need to add 100,000 beds each year for the next two decades at a cost of 50,000 crore per year. It would have been helpful if the government had shown encouragement by enabling an investment-friendly environment for this sector,” he said. Finance Minister has touched upon skill development programmes in his budget presentation. The direct health skills gain could exceed 2.5 million per annum, provided the country augment the right environment to encourage health skills by way of education, training and development.

The service tax net being expanded to include health check-ups undertaken by hospitals for employees of business entities, and for health services provided under health insurance schemes offered by insurance companies, may not be advantageous in ensuring better access to healthcare for the common man, besides being a deterrent for the advocacy of preventive health.

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