Since independence India has come a long way in terms of improving the health of its citizens. In just three decades, the country has added at least 11 years to the average life expectancy at birth, raising it from only 55 years in 1980 to 66 in 2013. Robust investments and expansion by the private sector has had a significant role to play in the development apart from other related factors especially innovations in medical technologies.
A recent report by KPMG and FICCI states that India spends 4.2 per cent of its GDP on healthcare out of which only 1 per cent is contributed by the public sector. The Indian government’s expenditure in healthcare is amongst the lowest in the world due to tight fiscal discipline. However, even without adequate public sector funding, the healthcare segment, which was at $73.92 billion in 2011, is projected to grow at a compounded annual growth rate of 16 per cent to reach $280 billion in 2020 thanks to efforts by the private players. Moreover, every $1 invested in the healthcare industry helps to generate $4 through its ancillary industries also by way of creating jobs through the value chain.
Public sector funding may be way below par and it would be impractical and nearly unfair to expect the government alone to bridge the infrastructure gap, which today stands at a deficit of about 5 lakh beds. To meet the standards set by the World Health Organisation (WHO), we need investments to the tune of $50 billion. What is required is not massive increase in public funding but a functional and enabling ecosystem to create and sustain the required physical and access infrastructure.
Today, lack of long-term capital is a major impediment to growth in the healthcare sector. Given our present situation, we need as much foreign investment that is going to the combined services industry, to come to the health sector. However, between April 2000 and September 2015, hospitals and diagnostics centres received only 1.21 per cent ($3.2 billion) of the total FDI inflows. A majority of expansions in the private sector today happens by raising debt; we need a wholesale market to raise long-term debt funds.
Great clinical quality comes at a cost and this has to be understood by all players, be it providers or payers. Concurrently, the average cost of healthcare has been going up in the country, making it unaffordable to the masses. According to WHO, only 33 per cent of the Indian healthcare expenditure in 2012 came from government sources. Of the remaining private spending, around 86 per cent was “out of pocket,” which means citizens spent their own money to the extent that scores of families ran into bankruptcy. On the other hand, in the developed economies, most of the spending is from the government sector and third parties.
In that context, there is a pressing need to provide health insurance to all citizens. One viable way to do this is by collecting a health-insurance cess for general citizens including people below the poverty line and mandating subscription-based contributions from the organised sector. We need health savings funds, as part of salary savings, to create a corpus for individuals that would accrue over the long term without adding to their financial burdens.
Lastly, India has a burgeoning opportunity in the medical tourism space, which was valued at $10.5 billion in 2012 (Transparency Market Research) and is projected to grow to $32.5 billion with a CAGR of 17.9 per cent by 2019. We are considered a leader in the market but our share continues to be in the low single digits. Other “low-cost destinations” including Thailand, Singapore, Brazil, South Korea and Philippines are aggressively competing to grow their shares. India offers medical facilities including critical care, at one-tenth the cost of the same in USA; one-fifth of it in Singapore and one-third of that in Thailand.
The Centre and state governments along with the ministries related to the sector such as ministry of Home, Health and Family Welfare, Tourism and External Affairs have to work together and in tandem to make India a global healthcare destination. It is imperative to keep in mind that medical tourism does not only contribute to the GDP but also helps to create a world-class ecosystem that can provide services with the highest of standards to our fellow citizens.
Great healthcare delivery makes both eminent economic sense, and social sense. It touches the core of what we as human beings need to provide to the next generation – a safe and healthy ecosystem.
The author is MD, Apollo Hospitals Group
