HEALTH MATTERS. Make healthcare a national priority

Last year’s Union Budget handled the weight of expectations very well and delivered on multiple fronts to ensure optimism and momentum. With the same optimism we look forward to Budget 2015-2016 and believe that the agenda of transforming the healthcare system will have primacy.

First, it is imperative that the healthcare sector be accorded national priority status. Though healthcare was included in the harmonised master-list of infrastructure sub-sectors by the Reserve Bank of India, long-term financing options are still not available for healthcare providers.

According priority sector status will help in the process of enabling the development of innovative long-term financing structures for healthcare providers apart from creating an attractive environment for domestic production of medical equipment, devices, and consumables while also catalysing research and development. This will channelise funds from the banking sector to creating necessary healthcare infrastructure and meet the societal objectives of the government.

The recently announced ‘Draft National Health Policy’ has the overarching objective of ensuring universal healthcare access. In this context, it is pertinent to note that currently, only around 4 per cent of the population in the country has health insurance coverage. This has led to a situation where out-of-pocket healthcare spending constitutes 86 per cent of total healthcare spends in India.

Further, a vast majority of the rural poor are unable to access quality healthcare.

The major reason for the low penetration of health insurance is because it is currently optional. It is also the case that most of the people opting for health insurance have some pre-existing illnesses. This has led to a high claims ratio in the health insurance business which makes it difficult for health insurers to sustain their operations.

To address these challenges, the government could explore making health insurance coverage mandatory for all citizens in a phased manner initially covering the organised sector. Employees could be given the option of paying their ESI contribution or purchasing insurance from any IRDA-regulated insurance company. Apart from enabling access to healthcare, this move would also meet the urgent need for augmenting healthcare capacity creation in the country.

Since healthcare is of high social importance, the government should consider granting exemption from service tax levy for property lease rentals for healthcare service providers, including hospitals and pharmacies. This will go a long way in alleviating the suffering of patients already suffering from the burden of disease.

Further, to reduce the hardships faced by trauma patients undergoing corrective surgeries as well to enable project India as a preferred healthcare destination and earn valuable foreign exchange, service tax on cosmetic surgeries performed on trauma patients as well as international patients coming to India on medical/tourist visas may be included in the negative list.

The growing burden of non-communicable diseases (NCD) is contributing to the vicious cycle of poverty in developing countries such as ours and poses a severe challenge to economic development.

It is, therefore, essential to extend the minimum prescribed criterion of having a 100-bed capacity hospital for claiming the benefit of 150 per cent deduction under Section 35AD of the Income Tax Act for a 50-bed specialty centre which is focused on the treatment of NCDs.

It is also strongly urged that long-term capital gains be fully exempt from taxation under a REIT/Business Trust structure. Under the revised scheme announced in the last Budget, there would be no capital gains exposure for the sponsor of a REIT/business trust at the time of exchange of shares in the infrastructure company for units in the REIT/business trust.

However, even under this scheme, capital gains tax would be applicable at the time of sale of units held in the REIT/business trust, to be paid by the sponsor on the difference between the sale price of the units and cost. If the units are held for a period of more than three years, then long-term capital gains tax would be applicable. This may be made exempt.

These measures would accelerate growth and ensure scale, speed and skill sets for setting up more hospitals which are direly needed given the huge healthcare needs in the country, and help attract more FDI inflows which will be good for the economy in the long term as opposed to FII inflows which are short-term in nature.

Further, the healthcare business by its very nature, is highly capital intensive given real estate costs and the need to make continuous investments to upgrade existing capabilities, apart from having a long gestation period.

It is, therefore, imperative to look at exempting the healthcare sector from the Minimum Alternate Tax (MAT) regime which practically negates the impact of accelerated depreciation benefit provided under Section 35AD of the Income Tax Act for new hospitals consisting of at least 100 beds. Given the urgent need to augment the existing healthcare infrastructure, the existence of the MAT regime acts as an impediment to initiatives focused towards achieving this objective.

Last but not the least, corporate social responsibility expenditure should be treated as expenditure incurred for the purpose of carrying on business or profession and allowed as a deductible expenditure under Section 37(1) of the Income Tax Act, 1961, to ensure equity. The objective of CSR is to require companies having a networth/turnover/profit above a threshold, to share the government’s burden in sponsoring socially relevant services.

The writer is the founder-chairman of Apollo Hospitals Group