In the interim budget for 2024-25 presented in February, Finance Minister Nirmala Sitharaman announced a 14% increase in the government's allocation towards the health sector. The budget for the financial year 2024-25 was raised to ₹90,171 crore from ₹79,221 crore in FY24. However, industry experts believe that, considering India’s strained public health infrastructure, the government could do more to ensure broader access to quality healthcare.

Increase India’s Healthcare Fund

The Union government’s interim budget allocation of ₹90,171 crore to the health sector is a step forward but is still perceived as insufficient by many in the industry. Prasun Sikdar, Managing Director and Chief Executive of ManipalCigna Health Insurance, emphasized the need for increased public expenditure on healthcare, in line with the National Health Policy's goal of raising public healthcare spending to 2.5% of GDP by 2025. Despite progress, India's healthcare spending remains low compared to global averages, necessitating a substantial boost.

“In the upcoming union budget, we expect the finance minister to announce higher allocation of funds for healthcare compared to what was proposed in the interim budget to meet the targets of the National Health Policy,” Sikdar stated.

Reduce the Tax on Insurance Premiums

Health insurance is increasingly vital, given the rising medical inflation and hospitalization costs, which have driven up health insurance premiums, particularly for senior citizens. Currently, customers pay 18% GST on insurance premiums. Parimal Heda, Chief Investment Officer of GoDigit General Insurance, proposed categorizing senior citizens under a separate HSN code and lowering the tax to 5%, making health plans more affordable and encouraging higher sum insured options.

Dr. S. Prakash, MD and CEO-designate of Galaxy Health Insurance, suggested reducing the tax on health insurance premiums from 18% to 12% while allowing insurers to claim input tax credits. He also advocated for waiving the tax for senior citizens, the physically disabled, and disease-specific categories.

Lowering the GST on health insurance premiums would also help improve out-patient-department (OPD) coverage, said Krishnan Ramachandran, MD and CEO of Niva Bupa Health Insurance. He noted that the 18% GST hindered the inclusion of OPD benefits in health insurance policies.

“Lowering the GST rate would support IRDAI’s vision of universal insurance coverage by 2047,” Ramachandran added.

Increase Tax Incentives for Insurance Covers

Section 80D of the Income Tax Act, 1961, provides tax deductions of up to ₹25,000 on health insurance premiums paid in a financial year. For senior citizens, the limit is ₹50,000. The industry has been demanding higher tax incentives to encourage more people to buy insurance. Ramachandran suggested linking the 80D tax exemption to inflation and raising the limits to ₹50,000 and ₹1 lakh for senior citizens, respectively.

Parimal Heda suggested incentivizing first-time health insurance buyers with an exemption of 200% of the premium paid, which could be phased down to the existing threshold under Section 80D over four years. This move could also help reduce the financial burden of the Pradhan Mantri Jan Arogya Yojana (PM-JAY), the Union government’s flagship health insurance scheme.

Establish a Health Regulator

While the insurance industry is well-regulated, the healthcare industry lacks supervision, particularly regarding pricing. Dr. Prakash highlighted the need for a health regulator to standardize operating procedures, create effective packages based on location and hospital expertise, and address unethical practices. This would increase public confidence and facilitate better financial transactions between insurers and hospitals.

Additionally, the government’s Universal Health Scheme requires better implementation to ensure greater participation of multi-specialty and corporate hospitals and better reach to the deserving below-poverty-level population. Uniformity in its implementation across all states also needs attention.

In conclusion, while the interim budget for 2024-25 has increased the healthcare allocation by 14%, experts believe that further investments and reforms are necessary. Reducing GST on insurance premiums, increasing tax incentives, and establishing a health regulator are crucial steps to improve India's healthcare system and ensure broader access to quality healthcare for all citizens.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst & Finance Saathi Telegram Channel for Regular Share Market, News & IPO Updates

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX & Upstox.