Health takes centre stage in Budget 2016-17

Ashish Mehrotra

The Union Budget delivered by the Finance Minister is one which is balanced with a focus on “transformation”. Healthcare has been given due importance and within that health insurance, an industry I belong to, has been given impetus. Some important points, especially related to tax rebates have not been addressed, but overall, the Budget is progressive and inclusive.

Vital tool for economy’s transformation

The noteworthy aspect of the Budget is its emphasis on the drivers for economic transformation and the fact that healthcare finds a place among the nine pillars of growth identified by the Finance Minister.

Healthcare, especially for the underprivileged, has been one of the core agendas of the Budget. The Budget proposes investments to provide dialysis services to the poor, with a centre in every district hospital. Apart from the increased access to dialysis services, the Budget has done away with taxes and excise on related equipment and consumables to bring down the dialysis cost, making it more affordable for the poor. The initiative to open 3,000 stores under the Jan Aushadhi Yojana reflects the desire of the government to provide a holistic health security to the poor.

An equally important step which has been taken is to provide health security to the poor, which by definition (of the ‘below poverty line’ or BPL), is a third of the country. The proposal to provide Rs 1 lakh health cover to BPL households implies that insurance penetration in the country takes a leap. The proposed cover would be just like a typical ‘family floater’ plan, where anyone belonging to a household would be eligible to benefit from the cover, up to a total cover of Rs 1 lakh. If one member of the household uses the insurance to cover for a treatment cost of Rs 30,000, the household members can still use the balance Rs 70,000 if the need arises. While similar to the RSBY scheme, the over three-fold increased coverage is what is significant.

The fact that a step has been taken towards united healthcare in itself is commendable. Indian healthcare ecosystem has been encumbered with out of pocket payments. It is a known fact that as out of pocket expenses reduce in developing economies, healthcare infrastructure development, pharma and medical device usage become relatively more viable. The priority of the government seems to be focused on both income generation at the rural level as well as on providing healthcare and social security.

Another significant step is to provide an incrementally more coverage to senior citizens, for whom the likelihood of the usage of the cover is higher. Rs 30,000 “top-up” would be provided to senior citizens living below poverty line, on an individual basis. Research on the lifetime distribution of healthcare costs suggest that nearly half of the healthcare expenditure need arises in the senior years. The impact of this additional coverage in combination of the massive BPL cover is expected to have a ripple effect on development of healthcare infrastructure in rural India. It is natural to expect infrastructure to grow corresponding to paying capacity of patients, which now is state-sponsored.

Expected benefits

As a health insurance industry representative, the Budget is promising. Data from other markets, both developed and developing, including our own experience in India, suggests that insurance penetration correlates strongly with per capita income. Therefore, the doubling of household incomes in rural India should in itself imply a significant spike in health insurance penetration. Further, I expect to see a surge in penetration among those who had low or no health cover and a halo effect on others who would understand and appreciate the benefit of health insurance through this.

Healthcare infrastructure has been abysmal in rural India and needs enhancements and investments. In contrast to three hospital beds per 1,000 people, rural India survives on less than one hospital bed per 1,000 people. The impact of increase in coverage in rural India should translate into an increase in consumption of relatively expensive healthcare services. This should help improve healthcare infrastructure by participation from private enterprises. Healthcare expenses, a leading cause of personal insolvency (and insolvency led suicides) should expectedly reduce. The help from rising income level as well as social and health security should help transform rural India, which in turn should have a major impact on the country overall.

Our role as private insurers in the country would not only be to complement the united healthcare but also would be to help implement these programmes through a public-private partnership. An example is the case of China, where private insurers are stepping in to provide complementary products to those provided by the state cover. In the years to come, my expectation would be that the purview of coverage would be enhanced to include a broader population. With state revenues increasing gradually, one can also expect a gradual increase in the coverage amounts to catch up with the double-digit healthcare delivery inflation.

The author is CEO & MD, Max Bupa Health Insurance. The views expressed in this article are his own