Budget 2024: Indian healthcare sector expects both structural & fiscal reforms

New Delhi: The healthcare sector has emerged as one of the fastest-growing segments, with the provider segment crossing the $132 billion mark, growing at a CAGR of 16%-17%. In a transformative move, the Indian healthcare sector is urging comprehensive structural and fiscal reforms in the upcoming Interim Union Budget 2024-25 Union Budget.

Even though it would be an Interim Budget, given the government’s priority to healthcare, it is expected that Finance Minister Nirmala Sitharaman would walk some extra mile concerning further strengthening the sector. Being the backbone of the healthcare industry, hospitals are anticipating significant measures, including the establishment of a dedicated regulator and rationalization of import duties on medical equipment.

Acknowledging the critical role of reforms in fortifying health systems, the government is expected to make pivotal announcements in the upcoming budget. The hospital sector, constituting 80% of the total healthcare market, seeks a booster dose through some specific structural and fiscal reforms including a push to Healthcare Insurance, Medical Travel Value, the establishment of a Regulator, Import Duty Rationalization on Medical Equipment, and Price Rationalisation.

Low penetration of Health insurance remains a major pain point. The sector would be expecting the widening of Ayushman Bharat- Pradhan Mantri Jan Arogya Yojna (PMJAY) on the one hand and a reduction of tax on healthcare insurance premiums on the other. India needs a health insurance model that accords priority to preventive healthcare as well and to achieve this goal, a major policy and regulatory push would be required.

“The Indian healthcare sector’s growth is commendable, and it has benefited from dedicated policy and regulatory support from the government. Recognizing the need for providing Universal Health Care, we expect the interim Union Budget 2024-25 to unveil a roadmap for addressing long-term infrastructure financing, increasing the number of medical and nursing colleges, and fiscal reforms in the health insurance sector. India needs a health insurance model that prioritizes preventive healthcare over procedures, and Narayana Health is well placed to achieve this goal with the support of the government.” said Mr. Viren Shetty, Executive Vice Chairman of Narayana Health.

According to industry experts, the healthcare sector provides direct employment to 4.7 million people and has emerged as one of the fastest-growing segments, with the provider segment now crossing the $132 billion mark, growing at a CAGR of 16%-17%.

Ms. Sugandh Ahluwalia, Chief Strategy Officer, Indian Spinal Injuries Centre, New Delhi, said, “The hospital sector is in dire need of a dedicated regulator and it is widely admitted that the establishment of a Regulator, leveraging the expertise of organizations like the National Accreditation Board for Hospitals & Healthcare Providers (NABH), can significantly streamline compliance and enhance transparency.”

“A regulator with statutory powers and including a broader representation of government officials and sector experts would go a long way in creating a new healthcare ecosystem. A Hospital Sector Regulator would be in a better position to eliminate entry barriers, create a Single Window Mechanism for over 100 compliances, and enhance ease of doing business, quality, and uniformity in the sector,” added Ms. Sugandh Ahluwalia.

Import duties on medical equipment have become a significant pain point for hospitals seeking state-of-the-art technology. With a substantial increase in import duties in the last three years, the sector has witnessed a substantial rise in the cost of medical equipment imports. The government’s ‘Make in India’ initiative is commendable, but big hospitals must maintain global competitiveness.

“Union Budget should focus on further boosting research and development infrastructure and tax rationalization, gearing up for an aspirational $50 billion MedTech economy. The heavy import duties on medical equipment affect operational costs. The Med Tech industry would be expecting a reduction of import duties, creating a win-win situation for both manufacturers and large hospitals, ultimately benefiting the patients,” expounded Mr.  Prashant Arer, India Head, Enbio Group AG.

“The immediate focus should be on rationalizing import duties to ease the burden on hospitals and prevent passing on increased operational costs to patients. Currently, heavy import duties act as a penalty for patients, and we believe that rationalization is imperative for the sector’s growth and sustainability,” added Mr. Arer.

Apart from import duties, hospitals are grappling with pricing challenges and delays in payments from government schemes such as CGHS and ECHS. Clear guidelines and addressing outstanding dues are crucial for the sector’s stability.

Dr Anand Bansal, Medical Director, Sri Balaji Action Medical Institute, said, “Rational pricing is the key. Timely payments and transparent pricing are essential for hospitals to provide quality care. We look forward to clear guidelines from the government, addressing outstanding dues and revising rates under government schemes to ensure the viability of healthcare institutions.”

“The government’s proactive approach in addressing the healthcare sector’s needs is commendable. As we approach the Union Budget, we expect innovative policies that not only strengthen the sector but also ensure affordable and quality healthcare for the 1.4 billion citizens,” concluded the Medical Director.

Healthcare experts acknowledge the pivotal role of India in global medical tourism and expect that there will be a policy push that can catalyze expansive growth, generating over 40 million jobs and substantial foreign exchange earnings.

Healthcare Expert Mr. Baldev Raj, Founder and Chief of Prius Healthcare said, “The government needs to provide a robust policy backing is imperative to cultivate and streamline medical-value travel (MVT) to India, paving the way for its evolution into a well-organized sector. The government needs more initiatives like ‘Ayush Visa’ (Special Visa Scheme for foreigners) and ‘Heal in India’ to make Indian healthcare and wellness a global phenomenon. India attracts medical tourists from different parts of the world. The government should create bilateral travel bubbles with countries contributing significantly to our MVT.”

“We will also be expecting some incentives in terms of land allocations, pricing, and tax rebates for greenfield hospital projects, similar incentives for PPP, and provisions for long-term credit facilities for the sector. Enacting stimulus packages, providing tax incentives, and facilitating ‘Priority Sector lending’ to healthcare, especially for enhancing capacity in Tier II and III cities, are essential. Incentives, accompanied by a promotional policy, can entice investments from medium and small hospitals into tier-II and tier-III cities,” recommended Mr. Baldev Raj.

Overall, experts expect that the government will surely take some additional measures to create a new healthcare economy in the country.