budget 2020

Health insurance coverage mandatory for all

Wishes Suneeta Reddy, Managing Director, Apollo Hospitals Group

On Insurance

“The health insurance sector is eagerly awaiting to see what has been outlined for the industry in the much debated National Health Policy. Though it has an overarching objective of ensuring universal healthcare access, it is pertinent to note that currently, only around 4 percent of the population in the country has health insurance coverage . Today out of pocket healthcare spending constitutes 86 percent of total healthcare spends in India. Further, a vast majority of the rural poor are unable to access quality healthcare.  The major reason for the low penetration of health insurance is because it is currently optional. It is also the case that most of the people opting for health insurance have some pre-existing illnesses; this has led to a high claims incidence that makes it difficult for health insurers to sustain their operations.

To address these challenges, the Government could explore making health insurance coverage mandatory for all citizens in a phased manner initially covering the organised sector. Employees could be given the option of either paying their ESI contribution or purchasing insurance from any IRDA regulated insurance company.  In this regard,  the present annual deduction limit of Rs 15,000 should be enhanced to Rs. 50,000 for self and family and the current annual limit of Rs. 20,000 in respect of dependent parents needs to be enhanced to Rs. 50,000. Also, with the ageing population expected to touch 20 percent by 2050, the  need for health insurance coverage during old age has become important. An introduction of insurance policy by all PSU insurance companies to cover specific health risks of the elderly such as Parkinson’s, Falls, Alzheimer’s, Incontinence, Vertigo, Osteoporosis (among women) etc. is extremely important to help the elderly deal with healthcare risks due to specific vulnerabilities of old age.  The policy should also be designed to offer both Indemnity & Benefit schemes. Such investment should be exempt from income tax under Sec 80D of the Income Tax Act, 1961.

Apart from enabling universal access to healthcare, the above move would also meet the urgent need for augmenting healthcare capacity creation in the country.”

On Preventive Healthcare

“ 2014-15 saw some very progressive initiatives taken by the government to the growing demand  in the sector and ease the bottle necks that hindered medical value travel  through the decision to set  up AIIMS like institutions in more States and the much awaited visa  on arrival facility. Like last year, we hope the Government will continue to lay emphasis on preventive healthcare. There is a clear co-relation between financial instability and unplanned out of pocket healthcare expenses in the absence of universal insurance coverage that eventually poses a severe challenge to economic development. Michael Bloomberg, ex NYC Mayor said and I agree “If you don’t focus on the environmental quality of life you will not be able to fix the economic side. If helping people to live longer, happier lives isn’t the purpose of government, then I don’t know what is. Yes, you need jobs, you need growth, you need a lot of things, but to say that you need them before your health – if you are dying, you might look back and say that wasn’t a good decision”.

Given the rising incidence of lifestyle diseases in India and the need to prevent loss of productivity,   it is imperative that employers get a separate annual deduction of up to Rs. 7500 per employee once every two years, towards expenses incurred for sponsoring their health check expenses. This should be over and above the existing deduction available in respect of medical reimbursement for salaried employees. Also, to encourage investors to set up specialised centres to treat Non Communicable Diseases (NCDs) such as diabetes, cardiac diseases and cancer which pose a great threat to the country the government could consider  extending the minimum prescribed criteria of having a 100 bed capacity hospital for claiming benefit of 150 percent deduction under Section 35AD under the Income Tax Act to a 50 bedded specialty centre which is focused on treatment of NCDs.

This apart, the Government could consider relaxing the service tax regime on property rentals for Hospitals and Pharmacies. Furthermore, the healthcare sector by its very nature, is highly capital intensive given real estate costs and the need to make continuous investments to upgrade existing capabilities apart from having a long gestation period .It is therefore imperative at look at exempting the health care sector from the Minimum Alternate Tax (MAT) regime which practically negates the impact of accelerated depreciation benefit which is provided under Section 35AD of the Income Tax Act for new hospitals consisting of at least 100 beds .”

Further, there was a welcome move in the  last Union Budget to introduce the concept of a REIT/Business Trust structure. However, it is strongly urged that long term capital gains under this structure be fully exempt from taxation. With specific reference to the healthcare sector, this measure would accelerate growth and ensure scale, speeds and skill sets for setting up more hospitals to meet the huge healthcare need in the country and help attract more FDI inflows which will be good for the economy in the long term as opposed to FII inflows which are short term in nature.

On CSR and Medical Tourism  

“Last year’s progressive initiatives have definitely raised expectations from stakeholders on the upcoming allocation. In light of recent reports on a decision by the government to cut 20 per cent from its 2014/15 budget, the upcoming Union Budget definitely has an important bearing on the national agenda of ensuring universal access to healthcare. While conferring the industry with a Priority Sector status would be the biggest ask, consideration of relaxing the taxation regime to boost investment and further medical value travel would be a highly welcome move. Today, India is viewed as a global destination for world class healthcare delivery. While Visa on arrival was a progressive decision made by the government to address the age old grievance of visa hassles faced by medical tourists, there are other  tax regimes that could be considered for revision or exclusion. From a patient benefit perspective one recommendation  in this regard would be to push service tax levied on cosmetic surgeries to the negative list order in order to reduce hardships faced by trauma patients undergoing reconstruction surgeries.

On the other hand, from an organisation perspective consideration of  Corporate Social Responsibility (CSR) spends as tax deductible business expenditure can be an impetus. As CSR expenditure has been mandated under the new Companies Act, 2013 for corporates, it should be treated as an expenditure incurred for the purpose of carrying on business or profession and allowed as a deductible expenditure under section 37(1) of the Income Tax Act, 1961 to ensure equity. Hitherto focus has been on capitalising on the burgeoning youth demographic. But advancement in medical sciences has fostered longevity and there is a growing ageing population that will need increasing assistance. In order to equip the senior citizens with a meaningful post retirement activity, the government should incentivize private enterprises such as elder care homes, retirement homes, libraries, nursing homes, schools etc. to employ or offer meaningful engagement opportunities to elders to enable them have quality social interactions and at the same time gain either monetarily or through perks and benefits offered by such engagement. Such income earned should be exempted from income tax under Sec 10 of the Income Tax Act 1961.

On Public Private Partnerships

Access to Healthcare is a fundamental right. The challenge our country faces today is the disparity in demand and supply for quality healthcare at affordable costs. As opposed to popular belief we do have the talent and the resources to bridge this gap. What we are lacking is the collaboration between institutions, government and private, to make the best use of their collective intelligence and skills to do this until we develop and create the needed physical infrastructure. Medical education, a key element of the healthcare eco system, needs to be prioritized. The government should create a conducive environment for corporates and private organisations to establish educational institutions that can scale up and optimise medical education in our country. So while it is imperative to provide universal healthcare access, we need to move over  and beyond the investments in physical infrastructure. ICT today plays a critical role in addressing the primary hurdle of accessibility and provisions must be made to tap into its pervasiveness. The awaited National Health Policy appears to be very ambitious and ensuring its smooth implementation would require the Public and Private sector to partner in devising solutions. The next issue is that of affordability that needs to be addressed due to growing out of pocket expenses towards medical treatment. The Government could explore making health insurance coverage mandatory for all citizens in a phased manner initially covering the organised sector. Employees could be given the option of either paying their ESI contribution or purchasing insurance from any IRDA regulated insurance company. Also, in order to ease the pressure  on individuals, present annual deduction limit of Rs. 15,000 towards medical reimbursement  can be considered to be enhanced to Rs. 50,000 for self and family.


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