Healthcare Inflation – A forgotten issue

The Budget Session of Parliament has been dominated by discussions on the price rise especially of food items. The Government of India has announced that it would resort to food imports to reduce the impact of lower production of food grains due to the failed South West Monsoon in 2009. The RBI Governor has already increased the Cash Reserve Ratio by 75 basis points. He has also left open the possibility of an interest rate before the Annual Credit Policy in April 2010. Political parties have also been forceful in highlighting their concerns on price rise and the impact that rising food prices have on the common man.

While the debate on rising prices especially food prices rages on, there is hardly any discussion on the rising healthcare costs. Studies conducted by the National Commission on Macroeconomics in Health show that the healthcare costs rose by 14% year on year over a ten year period from 1996 to 2005. The projected increase for the period 2006 to 2008 is also in the region of 13% per annum.

Increase in healthcare costs is indeed inevitable considering the following

- Continued economic growth leading to increasing disposable incomes
- Increasing penetration of private health insurance
- Increased Government spending on healthcare
- Introduction of newer and more expensive medical technologies
- Increase in wages for healthcare professionals

A recent Mckinsey study conducted in all OECD countries shows that over a 30 year period, healthcare inflation has outpaced economic growth by 2 % . In India with a average economic growth of 7% over the past five years, the healthcare cost increase of 14% is indeed worrying. What is even more a cause for concern is a lack of debate on rising healthcare costs – will this issue ever be discussed in Parliament ? Only time will tell!

The only real way overall healthcare costs can be brought down is to invest in prevention rather than cure – provide the population with incentives to improve their overall health. The Finance Minister in the recent budget has included preventive health checks within the ambit of the service tax net – a retrograde step without doubt !