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Budget 2018: Free Healthcare for the Poor


A robust healthcare system is a necessity of every country – developed or developing. A strong and efficient healthcare system of any country ensures quality healthcare provided to its people, thereby also increasing productivity of its people and helping the country grow by leaps and bounds. India spends about 1.15% of its GDP on healthcare and the government has set a target of spending 2.5% of the country’s GDP by 2025 on healthcare.

The government has taken various measures in the past year to overhaul the sector – capping the prices of several medical devices and screening of non-communicable diseases and so on.

We will discuss the important announcements that the finance minister has made for the healthcare sector in the 2018 budget.

World’s largest healthcare programme

One of the opening remarks of the finance minister in his budget speech on the healthcare sector was

“Only Swasth Bharat can be a Samriddha Bharat”

Meaning only a healthy India can be a prosperous India. He also went to say that if India has to take advantage of its demographic dividend it cannot do so without its citizens being healthy.

The highlight of this year’s budget for the sector has to be the announcement of the world’s largest healthcare programme. So, what exactly is this?

The government has set two major initiatives under the Ayush Bharat Programme, the programme will address primary, secondary and tertiary health care system covering both prevention and health promotion.

National Health Policy (NHP), 2017

The government under this scheme will set up 1.5 lakh health and wellness centres. These centres aim to achieve:

  • Provide comprehensive healthcare – includes non- communicable diseases and maternal and child health services
  • Intends to bring the healthcare system closer to the homes of the people
  • Provide free essential drugs and diagnostic services

The government has set aside INR 1200 Crs for this project. The finance minister also invited contribution of the private sector through their CSR activities to adopt these centres.

This looks quite low as a budget. At 1,200 cr. for 1.5 lakh centers, this is a cost of Rs. 80,000 per center. That is not even enough to pay the salary of a doctor for six months!

At some point this has to be augmented by either private sector participation or a massive outlay from the budget.

National Health Protection Scheme (NHPS): 5 Lakh Insurance per Family

Prior to this announcement the government ran the Rashtriya Swasthya Bima Yojana (RSBY), which provided INR 30000 to poor families. With the NHPS scheme the government aims to provide 10 Cr poor families (50 Cr beneficiaries) health coverage of 5 lakhs per family per year for secondary and tertiary care hospitalization. This is the world’s largest government funded healthcare programme.

The problem? Lack of enough funding.

The current allocation is only Rs. 2,000 cr. which, for 10 cr. families, is a cost of Rs. 200 per family. A private health insurance cover costs about Rs. 13,000 per family today and even with a 80% discount, the cost will be around Rs. 2,500 per year, or a cost of Rs. 25,000 cr. This has to be budgeted later.

The government intends to address the issues of productivity, wage loss and impoverishment with the introduction of these schemes. It will also help the government generate jobs and move towards its goal of universal health coverage.

Other announcements

The other announcements for the sector are

  • 600 Cr nutritional support to all TB patients at 500 per month for duration of their treatment
  • 24 new government medical colleges and hospitals by upgrading existing district hospitals in the country
  • Step up investments in research and related infrastructure in premier educational institutions which also includes health institutions under the “Revitalising Infrastructure and Systems in Education (RISE)” by 2022 at an outlay of 1 lakh Cr
  • Senior citizens will be able to claim deduction under section 80D for up to INR 50000 from 30000 earlier towards payment of health insurance and/or medical expenditure
  • Government intends to build 2 Cr toilets which will help in the overall health of the family

Expenditure on the Healthcare spending
Budget 2018: Free Healthcare for the Poor

This increase, of Rs. 5,000 cr. is about the same in terms of % of total government spend.

The government plans to increase spending on healthcare by 12% in FY19 to INR 52800 Cr. The biggest jump is seen in the national rural health mission by 15% to INR 24280 Cr.

Funding for this will come from various sources, some of them are

  • Indian Infrastructure Finance Corporation Limited (IIFCL) will help finance various infrastructure projects, this includes health infrastructure as well
  • Existing 3% education cess to be replaced by 4% health and education cess. Government expects to mop up INR 11000 Cr from the additional cess
  • National Investment fund to fund expenditure on health education

It’s all about the implementation!

The ideas are great, but most of the issue is in the implementation. What it will end up costing us is probably a lot more than expected. For a country of our size, we should be spending more than 150,000 cr. on healthcare, and improve our own resources.

We should also promote startups to help with last mile delivery of diagnostic services, and augment third party hospital trusts with funds, since many of them already deliver services to the poor (eye camps, vaccinations, check-ups).

The 5 lakh rupee insurance cover is awesome if done well, but at the same time should not be a route for over-hospitalization. Let’s see how it measures up, because it’s all about how it’s implemented.


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