Insuring India’s Healthcare Sector

Context: Private healthcare investors are wary of deploying their capital in the healthcare space despite their impressive contributions to the economic and social welfare of India.

Significance of Private Healthcare Sector

• Employment: it contributes greatly to employment opportunities and GDP growth (every hospital bed generates five direct and up to 25 indirect jobs).
  • The healthcare sector was the only sector that has not resorted to layoffs amidst pandemic.
• Imperative for a functional health system: because meagre public health spending is not enough to sustain the healthcare system.
  • The 15th Finance Commission has recommended an increase in public health expenditure to 2.5% of GDP by 2023-24 from the current 0.95%.

Key Challenges Faced by Private Healthcare Investors

• Low healthcare returns: healthcare returns on capital investments have traditionally been lower than those of other sectors such as financial services, oil and gas.
• Higher incidence of taxes: private healthcare providers are charged Goods and Services Tax (GST) on input goods and services (like injectables, implants and medicines) but cannot bill the customer.

Way Forward: Increase private investment in the healthcare sector through following policy measures-

• Development of healthcare infrastructure system: through -
  • Provision of land to set up facilities.
  • Reduction in charges for electric power to 50% of commercially applicable rates.
  • Formulation of modalities to set up Special Healthcare Zones (SHZs).
  • Setup health infrastructure technology upgradation fund.
• Ease the tax burden: through the imposition of GST on healthcare services and insurance premia, 15-year tax holiday for hospitals with a minimum of 100 beds, import duty relief
  • Encourage ‘zero-rating’, whereby the credit chain remains intact while ensuring that input taxes are not an additional burden. (or a maximum 5% GST).
• Encourage investment in medical insurance: by setting a consolidated limit of ?1,00,000 per family as insurance premium deduction.