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Did the Budget give Adequate Incentive to Healthcare?

Budget after budget, the stakeholders in healthcare keep looking forward to some significant policy decisions that would impact the healthcare of the people and healthcare industry as a whole in a positive manner. Unfortunately, it appears that the Government has not yet started looking at healthcare as an industry. We ask the experts to review the incentives given to healthcare in Budget 2007-08

‘The Sound is Loud, the Light is too Dim'

The 150 per cent weighted deduction in pharma, R&D and exemptions for clinical trials in the budget are indeed a welcome. Similarly, reductions in customs duty of medical equipment are encouraging. But this benefit is mainly for biotech and pharma, not so much for hospitals. It just shows that the pharma sector is viewed as an industry whereas healthcare delivery is not.

Another set of good news is that the allocation of Integrated Child Development Plan (ICDP) has gone up by Rs 700 crore. The funds for the National Rural Health Mission (NRHM) have also gone up from Rs 8,207 to Rs 9,947 crore. Ayurveda, Homeopathy and Unani combined have been allocated Rs 120 crore. The question is whether these allocations are result-oriented? What are the mechanisms in place for their utilisation? Increase in deductions for medical insurance, similarly, may bring a smile on the face of many in the middle class.

Whenever the Government addresses healthcare, it increases allocations for diseases like malaria, TB, HIV and polio as also mother and child health. It is a good sign, but inadequate when viewed in the light of the existing and emerging healthcare needs of the population. The question is when are we to create infrastructure that would address the needs of people who may be suffering from these and other hereditary, contagious or lifestyle diseases. No effort seems to have gone towards creation of a healthcare infrastructure for our country, which is the need of the hour.

Whenever confronted on this issue, the central Government tends to evade by saying "health is a state subject". If policy decisions are required to address this vital aspect of human development, such a stand cannot hold water anymore. The need is to consolidate the efforts at the country as well as state, district and village levels into one homogenous integrated infrastructure.

The budget must look at it and provide resources to create this infrastructure, pan India. In addressing healthcare as an industry, one cannot wish away the need to look at the demand side just as the supply side. This is the way one looks at other industries.

Healthcare deserves to be categorised as an infrastructure, and encouragement must be given all to investors. This is an opportunity missed. For Government, it would seem that healthcare allocations are borne out of an unavoidable compulsion like defence or police.

The allocations made year after year indicate this kind of a mindset. Is healthcare an industry and the responsibility of the Ministry of Industry or is healthcare an unavoidable social burden for a Government, handled by the Ministry of Health? Unless this dichotomy is resolved, budgets would continue to allocate resources for healthcare in an incremental manner. The sound is loud, the light is too dim!

For instance, ‘Aam Admi Bima Yojna’ could easily have also included healthcare besides accident, disability and death. One could have found even the resources through a healthcare cess which most Indians would be happy to contribute to. Government could incentivise investments in healthcare delivery in districts with lower bed-to-population ratio. Similar is the need of the poorer sections in terms of health insurance, mostly/partly subsidised by the Government.

In a nutshell, one cannot help but have the nagging feeling that policy decisions and the budget do not match the lip service of the Government towards improvement of the healthcare, which should make it more affordable and accessible for the people of this country.

Brig Joe Curian

'The Demand of Healthcare Industry has been Ignored for far too Long'

The UPA Government has done a laudable job with the 2007 budget in supporting the healthcare industry. The increase in allocation for health and family welfare by 21.9 per cent to Rs 15,291 crore reaffirms its commitment.

The reduction in import duty on medical equipment by five per cent, which now stands at 7.5 per cent, will lend relatively better benefits to high-end healthcare providers. Healthcare is capital-intensive and equipment forms a significant portion of costs. It will also enable hospitals to go in for replacements and technology upgradation. We would expect it to come down further in future in favour of the common man.

For groups like Manipal, which has interests in research and development, the extension of the concessional rate of five per cent duty for public funded research institutions will be a great support. The exemption of service tax on clinical trials for new drugs will help our clinical trial initiatives attract more foreign and domestic partners.

This year, there is an emphasis on mother and child care, integrated child development services and prevention and treatment of communicable diseases. The Government's intention is clear when it announced its efforts to achieve zero level disease through the National AIDS Control Programme and a major outlay for immunisation.

There are also measures for improvement in healthcare in rural areas and increased budget allocation of National Rural Health Mission from Rs 8,207 crore to Rs 9,947 crore. Initiatives of ‘anganwadi centres’ and Associated Social Health Activists (ASHAs) will have significant impact on community health, particularly in rural areas.

There were disappointments with regards to tax rebates on drugs and consumables. Except the two per cent reduction in customs duty, it maintains a status-quo on drug manufacturing industry. If the Government could have considered reducing the excise duty from the current 16 per cent, drugs would have been more affordable to the common man. Similar tax relief in the costs of consumables, another high value component in the treatment of specialties like cardiology, neurology and orthopaedics, would have helped to bring down the costs of overall treatment in these super specialties.

The demand of healthcare industry to give it the 'infrastructure' status has been ignored for too long. The Government should also consider mandatory health insurance in future which will help eradicate the economical burden of costs of treatment. Grants in research and concession on contract research would help develop newer and cheaper drugs.

Going forward, we need the Government to lend support to the private players in transforming basic healthcare delivery across the country. Private players can ensure access to quality and safe medical practices at grass roots levels and stem the pilferage of precious tax-payers money. The Finance Minister has already acknowledged the successful Public Private Partnership (PPP) models in various sectors.

R Basil

'Budget 2007-08 has been Progressive'

"The budget has recognised the special needs of the rural sector with regard to healthcare" - Ram Sharma Managing Director Becton Dickinson India Private Ltd

The Union Budget 2007-08 has taken cognisance of the needs of the healthcare and medical devices sector and included various provisions which will help the sector achieve greater growth.

There has been greater thrust on overall healthcare with the allocation of funds for healthcare being increased by 21.9 per cent to Rs 15,291 crore. An important step forward has been in the medical devices sector with the decrease in the peak rate of duty for medical devices and equipment to 7.5 per cent. This move will reduce treatment costs and make critical care more affordable for the patients. Currently, over 65 per cent of India's need for medical devices and equipment is met through imports; therefore, the reduction in duty rates will encourage more players in the medical devices sector.

Another important measure in providing greater access to affordable healthcare is the increase in the limit to which tax exemptions are provided under section 80D, a move which will encourage more citizens to take up medical insurance cover.

The budget has also recognised the special needs of the rural sector with regard to healthcare. The increase in the fund allocation for National Rural Health Mission to Rs 9,947 crore, increased spending on polio and AIDS prevention and the call for greater public-private partnership is an important step in the right direction.

The convergence of key public health issues such as immunisation, malaria and tuberculosis would also help build scales and efficiency in addressing these key concern areas of public health.

The budget provisions will also provide fillip to pharmaceutical research through measures like the exemption of service tax from clinical trials of new drugs and the extension of weighted deduction on R&D expenditure for a further period of five years. However, some measures which would have further helped the sector include further lowering or removal of Central Sales Tax (CST) and extending the same tax benefit to the biotechnology sector as are currently available to the Information Technology sector.

Overall, the Union Budget 2007-08 has been progressive in its provisions for the healthcare sector. It has addressed crucial concern areas for the industry and provided incentives that will help make the industry more competitive whilst ensuring that healthcare is more accessible and affordable for patients.

Ram Sharma