New Delhi, January 9, 2025: With the Union Budget approaching, the healthcare sector is voicing its concerns and presenting key expectations or recommendations to address systemic gaps. Leaders from prominent healthcare institutions are urging the government to introduce robust reforms and provide significant investments to achieve equitable and affordable healthcare for all.

While India's out-of-pocket expenditure on healthcare has reduced from 64.2% in 2013-14 to 39.4% in 2021-22, as per the National Health Accounts Estimates, the journey toward Universal Health Coverage (UHC) remains challenging. Public healthcare expenditure has increased from 1.13% to 1.84% of GDP over the same period, but experts believe this is far from the target of 3% by 2030.

“We expect a clear roadmap to increase public healthcare spending. Strategic investments coupled with supportive policies can bridge the rural-urban divide and ensure access to critical care, especially in underserved regions,” said Dr. Praveen Gupta, Principal Director & Chief of Neurology, Fortis Hospital. He emphasized that a holistic approach involving all stakeholders is essential to ensure healthcare reaches every corner of the country.

One of the primary expectations from the upcoming budget is tax reforms. Industry leaders and experts are advocating for zero-rating GST on healthcare services or rationalizing it to a 5% slab, which can significantly reduce costs for hospitals and nursing homes. “Reinstating the 150% deduction under Section 35AD of the Income Tax Act for new healthcare projects and providing tax holidays for a minimum of 15 years for new projects, alongside a 10-year tax relief for existing facilities, are also key demands. Such measures will ease the financial burden on healthcare providers and ensure that cost savings are passed on to patients, making healthcare more affordable,” said Dr. Aashish Chaudhry, Managing Director at Aakash Healthcare.

Another critical demand is the reclassification of hospitals as infrastructure investments. This move can attract substantial private sector participation, essential for building state-of-the-art healthcare facilities. Coupled with interest rate subvention for medical equipment, these reforms can provide the financial impetus needed to modernize India’s healthcare sector.  Mr Anup Mehra, DGM Finance - PSRI Hospital pointed out, “Reclassifying hospitals as infrastructure can open up avenues for long-term investments, enabling the sector to expand capacity and improve service delivery.”

India’s Tier II and Tier III cities remain underserved in terms of healthcare infrastructure, creating an urgent need to scale up private healthcare facilities in these regions. The Ayushman Bharat-PMJAY scheme, aimed at improving healthcare access, has increased demand in smaller cities. However, the scheme's current pricing models fail to reflect the true cost of service delivery, leaving providers in a financial bind. “Rationalizing package pricing and providing operational subsidies for power and utilities, akin to those offered to government hospitals, can ease this burden. Without equitable pricing models and relief on operational costs, healthcare providers cannot sustain operations in these regions,” said Dr. Rajendra Patankar, Chief Executive Officer, of Jupiter Hospital, Baner Pune.

The rise in non-communicable diseases (NCDs) poses another significant challenge. By 2030, NCDs are projected to cost India $6 trillion, making comprehensive screening and diagnostics programs an urgent priority. Dr. Aakar Kapoor, CEO of City X-Ray, stressed the importance of these programs, stating, “Early detection can reduce long-term healthcare costs and improve patient outcomes. Incentives like tax exemptions for diagnostic centers and lower import duties on equipment are necessary to make this vision a reality.”

India also has tremendous potential in medical value travel (MVT), but current policies do not fully support this burgeoning sector. “Introducing tax exemptions for earnings from medical tourism and streamlining visa processes for international patients can make India a global hub for healthcare services. India’s medical expertise and cost advantage are unmatched, but policy reforms in medical visas and rationalizing fees are essential to attract more patients,” emphasized Dr. N. K. Pandey, Chairman and Managing Director of Asian Hospital emphasizes.

Funding remains a critical barrier to scaling healthcare infrastructure. Experts recommend innovative funding mechanisms such as a “Fund of Funds,” public-private partnership (PPP) models, and the creation of healthcare-specific business trusts like Real Estate Investment Trusts (REITs). “Tailored funding mechanisms can drive innovation and expand infrastructure to meet the growing demands of our population,” said Dr. Gupta.

The sector also seeks government support to address the acute shortage of healthcare professionals and critical care facilities in rural and semi-urban areas. While 70% of the population resides in rural India, 80% of specialists are concentrated in urban centers. This disparity, coupled with a shortage of advanced medical equipment in smaller towns, is a significant hurdle in providing quality care. Bridging this gap requires collaborative efforts between the public and private sectors. Mr Anup Mehra, “The government must create incentives to attract skilled professionals to underserved areas and invest in building comprehensive healthcare ecosystems.”

Healthcare leaders and experts also stressed the importance of insurance reforms. Despite schemes like Ayushman Bharat, insurance penetration remains low, leaving many households vulnerable to catastrophic health expenses. Implementing mandatory health insurance for all citizens and gradually extending coverage to self-employed professionals can make healthcare more equitable.

India’s healthcare sector stands at a crossroads, with immense potential to transform its delivery systems. Significant investment in infrastructure, rational policies, and increased collaboration between stakeholders are vital to achieving the ambitious goal of Healthcare for All by 2030. Health sector experts believe the Union Budget offers a unique opportunity to address these challenges and lay the groundwork for a sustainable and inclusive healthcare system. “This is the time for decisive action. By prioritizing funding, accessibility, and innovation, the government can make healthcare accessible, affordable, and equitable for all citizens,” concluded Dr. Chaudhry.