Invest, and use market as medicine

Establishing a robust healthcare system is supercritical for any nation. Yet, state investment in health in India has been chronically low. Central and state governments’ budgeted expenditure on healthcare was 2.1% of GDP in FY23. It was 2.2% in FY22, against 1.6% in FY21. 2017 National Health Policy aims to increase state spending to 2.5% of GDP by 2025. The low investment in health has led to a demand-supply gap, which private sector has been closing. While this means choice, better medical services and more jobs, it has also led to anomalous pricing of procedures and high out-of-pocket expenditures, making implementation of a cashless health insurance system difficult.

Last week, in response to a PIL, Supreme Court admonished GoI for failing to enforce the 12-year-old Clinical Establishment (Central Government) Rules, which authorises standardised rates for medical procedures and treatments. It also directed it to regulate hospital treatment charges within six weeks. While the top court’s intervention is understandable, there is no ‘right’ cost of procedures. It depends on many factors – location of hospitals, expertise of doctors and services offered. The healthcare industry faces the challenge of balancing affordability, quality and accessibility against financial sustainability. A universal rate penalises quality, reduces patient choice and could force India’s best doctors to move out.

Instead of clamping down on private players – state intervention on price ceilings – India must invest in public facilities from primary to tertiary sectors, as Ayushman Bharat is trying, expand insurance coverage, and leverage the private sector to deliver affordable healthcare. Make the market, not the state, cure unhealthy healthcare.