Medical Inflation in India
India has a huge advantage in terms of healthcare. The Indian doctors are highly skilled and deliver medical outcomes that are comparable to the best in the world. However healthcare human resource (doctors, nurses, paramedics, technicians, support staff etc) cost is lower than most other countries. India is acknowledged to be the pharma capital of the world and cost of pharmaceutical products is relatively much cheaper in India. Most of the medical consumables, devices and technology was imported in the past, but now with the 'Make in India' thrust, a good proportion of medical consumables and devices are now manufactured in India and are available at a much lower cost. These and other factors have ensured that Indian healthcare is the most cost-efficient system in the world. Due to the comparatively lower costs more number of Indians are able to access quality healthcare and India has become a destination for good healthcare for over 200 hundred countries. Having said this, one must acknowledge the fact that a significant proportion of Indian population still struggles to find resources to access good quality healthcare. In this scenario it would be ideal to maintain the cost advantage while creating financial access to those who cannot afford with tools like Ayushmanbharat and many schemes in the states and a push towards health insurance.
While the average global healthcare costs are rising at 9.6% year on year, the costs in India are rising at 13.8% which is the highest in the world. If this trend continues the cost-efficiency of Indian healthcare will soon be impacted and this will have a disastrous impact on our socio-economic and health indices. Cost escalation in healthcare must be recognized as a serious issue and addressed aggressively.
Key Factors Contributing to Medical Inflation
The board of directors of an Indian company typically consists of a mix of executive and non-executive directors, including independent directors, appointed to provide strategic guidance, oversight, and governance. The Companies Act, 2013, mandates certain requirements regarding the composition of the board, such as:
Minimum and Maximum Number of Directors: Every Indian company must have a minimum of three directors, with public companies required to have at least three independent directors on their board. The maximum number of directors permissible varies based on the company's articles of association and shareholder approval.
Independent Directors: A certain percentage of the board must comprise independent directors, as stipulated by the Companies Act and Securities and Exchange Board of India (SEBI) regulations. Independent directors play a crucial role in providing impartial oversight, challenging management decisions, and safeguarding the interests of minority shareholders.
Functions and Responsibilities
1. Increased Demand for Healthcare Services
With the growing population and rising awareness about health and wellness, the demand for healthcare services has surged. This increase in demand puts pressure on existing healthcare facilities, often leading to higher costs.
Behavioural patterns are also contributing to increasing costs. In the past one would approach a big hospital only for serious or complicated clinical conditions and a major part of the sickness in the community used to be addressed by the family doctors and smaller hospitals and nursing homes. However there is a behavioural shift now, with people approaching larger tertiary care facilities even for relatively small ailments resulting in a significant increase in costs.
2. Advancements in Medical Technology
Innovations in medical technology, while improving the quality of care, often come at a high cost.
Advanced diagnostic tools, surgical techniques, and treatment options tend to be expensive, contributing to the overall increase in healthcare costs. A typical example is cancer care. With a better understanding of the disease, newer diagnostic and therapeutic options have evolved and are showing significantly higher survival and cure rates in cancer. While the outcomes have improved cost escalation has been huge.
3. Rising Cost of Pharmaceuticals
The price of medications, both generic and branded, has been increasing. Factors such as raw material costs, research and development expenses, and regulatory compliance contribute to this rise.
In addition newer forms of treatment which provide highly personalized and precise care are now available. Immunotherapy, stem cell treatment and a variety of newer options are improving clinical outcomes but are expensive and often beyond the reach of the common man.
4. Infrastructural Challenges
India faces significant challenges in terms of healthcare infrastructure. Limited availability of quality healthcare facilities in rural areas often forces people to seek expensive treatment in urban centres, driving up costs. The costs here are not just related to healthcare, they include travel costs, dislocation costs and loss of earning of the people who accompany the patient. These are avoidable costs and are primarily due to concentration of high end hospitals in metros and larger cities and peoples perception that good care for any type of ailment is best available in these large city based hospitals.
The perceived gap between the quality of care provided in public facilities as compared to private facilities is another factor which is pushing up costs as people more often than not seek care in private healthcare settings rather than public facilities where adequate care could be provided.
5. Regulatory and Administrative Expenses
Compliance with various regulatory requirements and administrative expenses also adds to the cost of healthcare. Hospitals and clinics need to invest in maintaining standards and ensuring compliance with health regulations.
Increasing medical litigation is forcing the doctors towards 'defensive practises' to protect themselves. This is also contributing to increased costs for the patients
Indian healthcare is today dominated by private healthcare with over 70% of care being provided in private institutions. While the growth of private sector has brought in revolutionary changes in Indian healthcare, the systems are not conducive to delivering high quality care at a lower cost. Private institutions need cash flows to sustain and grow and are therefore responsible for the margins. However one needs to help in bringing down the costs incurred by the private providers and passing on the benefits to the patients. Hospitals are treated as commercial establishments and pay all levies (water, fuel, electricity, taxes etc) as per the commercial rates. Interest rates on loans secured by hospitals are no different from loans raised by any other commercial establishment. These are factors which add to the costs and lead to serious medical inflation.
Impacts of Medical Inflation
1. Affordability
The rising cost of medical care makes it increasingly difficult for middle and lower-income families to afford quality healthcare. This often leads to higher out-of-pocket expenses and financial strain. Healthcare spend is documented to be one of the major causes of rural bankruptcy. Medical inflation will therefore have an impact on socio-economic fabric of the country.
2. Insurance Premiums
Health insurance is undoubtedly the most important tool in making healthcare affordable. Thus far the insurance premiums are within the reach of a significant section of our population, though the percentage of insured population still remains low. Medical inflation directly impacts health insurance premiums. As healthcare costs rise, insurance companies increase premiums to cover the higher expenses, making insurance less affordable for many.
3. Access to Care
Higher costs can lead to reduced access to necessary medical care, especially for those without sufficient financial resources. This can result in delayed treatment, worsening health conditions, and increased mortality rates. It must also be noted that delayed diagnosis and treatment adds to the cost, setting off a vicious cycle
4. Economic Burden
The economic burden of medical inflation extends beyond individual households. It affects businesses through higher employee health benefit costs and can strain government healthcare budgets. Hence medical inflation has implications beyond health indices and increases the sickness burden in the country. Increased sickness burden adds to healthcare costs at the individual level, community level, organization level and the government level. In this context we also need to understand that sickness does not only cause an increased financial burden but has other collateral outcomes like reduced productivity of people and increased absenteeism from work.
Strategies to Mitigate Medical Inflation
1. Policy Interventions
Government policies aimed at controlling the prices of essential drugs and medical devices can help mitigate the impact of medical inflation. Some measures have been initiated in this direction and we have seen some results. However bringing down of costs of pharma and consumables using the regulatory route is a potential tool to control medical inflation, provided all the stakeholders are involved in the decision making process and the benefit is passed on to the patients.
Government must consider healthcare as a priority sector and must grant a series of concessions including concessional tariff on power, fuel, water & essential supplies, capital at a lower cost, tax holidays and concessions, favourable treatment as GST is considered, encourage made in India healthcare products to be used in hospitals etc. While all these measures will bring down healthcare inflation but the critical thing is to ensure that the benefits are translated to the payors instead of the providers.
Healthcare litigation must not be allowed to become trivial promoting 'defensive medicine' by doctors and hospitals. Serious medical negligence must not be tolerated but at the same time doctors and hospitals must be protected from avoidable litigation and litigation based on financial considerations.
2. Investment in Public Healthcare
Enhancing public healthcare infrastructure and services can reduce the dependency on expensive private healthcare facilities, making healthcare more affordable.
Public investment must go into preventive, primary and secondary healthcare which accounts for a major proportion of healthcare requirements in the country. A robust public healthcare delivery system for at the primary and secondary levels will reduce the need of people to approach tertiary care private or public facilities where care is bound to be more expensive. A gatekeeping mechanism would be of immense help in bringing down the costs of healthcare by avoiding spends that are not required.
3. Promoting Preventive Healthcare
No Country in the world has or will ever have the GDP to treat all the illness that will occur in the community. Even the most advanced countries are reeling under the pressure of funding healthcare programs. Reduction of disease burden in the community is the only sustainable method to control healthcare costs. Today we have a battery of preventive healthcare measures and techniques (eg: nutrition, physical activity, immunization both in children and adults etc) which could help in bringing down the disease burden. In addition we also have a large battery of investigations to screen for risk of different ailments which help in identifying the people at risk and instituting interventions to prevent the occurrence of disease. Encouraging preventive healthcare measures can reduce the overall burden of diseases, lowering the need for expensive treatments.
Identifying a disease early and treating in the early phase is always cheaper than treating the disease in an advanced stage. Community awareness and scientific preventive health checks are tools which help in early identification of diseases and must be mandated depending on the age group of an individual.
4. Innovations
Developing innovative healthcare financing mechanisms, such as public-private partnerships and health insurance schemes tailored for low-income groups, can improve affordability and access to quality healthcare
Technological innovations like telemedicine, teleradiology etc have a potential to bring down costs. Similarly when applied in appropriate situations Artificial intelligence can help in early detection, risk reduction, personalized care and precise treatment. Newer models of care like home healthcare, wearable devices etc also have the potential to bring down costs and control medical inflation
Medical inflation in India poses a significant challenge, but with concerted efforts from the government, healthcare providers, and the community, it is possible to address and manage its impact, ensuring that healthcare remains accessible and affordable for all.