The government needs to allocate more funds to set up primary health centres and equip them adequately
The hospital industry in India logged a 17% compound annual growth rate (CAGR) in the five years through fiscal 2017 to reach the Rs 4 trillion mark. CRISIL Research expects the industry to maintain the pace, at 16-17% CAGR, in the next five years to touch Rs 8.6 trillion. Increasing penetration of health insurance and demand for quality healthcare are among the factors fuelling growth.
Private final expenditure for healthcare has grown at 17% CAGR in the five years through fiscal 2016 to Rs 3.4 trillion (at current prices). While the population is still under-penetrated in terms of health insurance, coverage has increased significantly over the past year. In fiscal 2017, 438 million Indians came under the umbrella of various health insurance schemes, extending the coverage to 34% of the population from 28% in fiscal 2016.
According to the World Health Organisation's Global Healthcare Expenditure Database, India's total expenditure on healthcare (government and private) was a low 4.7% of gross domestic product in 2014. This can be attributed to under-penetration of healthcare services and lower propensity to spend on healthcare.
In terms of per capita government expenditure on healthcare (at international dollar rates adjusted for purchasing power parity), India stood at $80 in 2014 as against $4,541 for the United States, $2,808 for the United Kingdom, $958 for Russia, $607 for Brazil, $407 for China, and $574 for Malaysia. Lower per capita spend on healthcare in India can be partially attributed to relatively low contribution of the government, at only 30%, with the bulk coming from private players.
A key concern India faces is affordability of healthcare for the majority of its population, given a conspicuous lack of extensive and adequately funded public healthcare services. This leads to large out-of-pocket expenditure, direct payments made by individuals to healthcare providers at the time of service use.
As per World Health Organisation data, while 62% of the total healthcare expenditure in India is borne by the people, this proportion rises to a staggering 89% in case of private healthcare services (private healthcare expenditure includes direct household or out-of-pocket spending, private insurance, charitable donations, and direct service payments by private corporations). While this proportion has declined over the past decade, it remains high compared to key developed and developing nations.
The government of Karnataka passed a Bill introducing price caps on medical procedures in November 2017. West Bengal had passed a similar Bill in March 2017. Such legislation may influence private participation in the healthcare industry, especially if other states follow the same course. The industry, driven by the private sector, is expected to witness low investment, if the Bill is implemented.
In a move to make the healthcare delivery market affordable, the central government introduced price capping on medical implants such as cardiac stents and knee implants in the past year to the range of 80%. The drug eluting stent, which cost Rs 1,00,000 to Rs 1,50,000 (excluding taxes) before the price cap, is now priced at Rs 31,680 (including the Goods and Services Tax). The government has introduced price caps at the trader and hospital level, influencing the operating margins for players. With the introduction of such price caps, we expect international companies, which hold the major share of current supply in the country, to withdraw supply.
We expect the government to:
· Increase spending on the healthcare sector
· Allocate more funds to set up new medical colleges (graduate and post graduate)
· Allocate more funds to set up primary health centres and equip them adequately
· Encourage the establishment of manufacturing plants for medical electronics, consumables and implants
· Put in place an enabling environment that will attract capital - both financial and intellectual
· Adoption of Public Private Partnership in the healthcare delivery market by incentivising the private sector with structured tax benefits
· Adoption of Universal Health Insurance and to incentivise consumers through higher tax deductions for healthcare expenditure and insurance payouts.