The Bill and Melinda Gates Foundation (BMGF) called it the “decade of vaccines”. In 2010, the foundation pledged some $10 billion to help research, develop and deliver vaccines in developing countries, including in India. It spent more in India—$282.5 million—in 2017 as compared to any other country, pouring all of it into building a supply chain and ensuring demand for vaccines in the country.
And now it wants to withdraw, leaving the Indian government to foot an enormous bill. This is one of the main reasons the government’s healthcare expenditure could shoot up in the coming years.
BMGF and the network of vaccine makers it funded is just the tip of the iceberg. The past decade has seen a slow march towards privatisation of healthcare. This, in a country that sorely needs government intervention to provide for the millions in need but without the means to access quality healthcare.
Stats From The Last Census
The 2011 census put the population of India at 1.2 billion. That number is expected to rise to 1.37 billion by 2020. That’s an addition of nearly 170 million people—if it were a country, it would be the world’s eighth most populous.
Per capita public expenditure on health has grown in the same period. It has gone up from Rs 621 ($8.7) at the turn of the decade to Rs 1,657 ($23.2) in 2017-18. However, as a percentage of GDP, allocations for health continue to remain inadequate, lagging behind neighbouring countries. Including expenditure by states, this amounts to 1.4% of GDP. Nepal, on the other hand, spends 2.3%, while Sri Lanka spends 2%.
With the government taking up more of the burden of preventative healthcare—vaccinations—on its shoulders, it passed the burden of curative healthcare on to hospitals. The onus, therefore, was on private players to provide healthcare to those who cannot afford it.
Through its ambitious $1.54 billion health insurance scheme, Ayushman Bharat, the government fixed treatment prices, racking up a hefty bill for insurance premiums in its quest to make healthcare affordable for nearly 500 million people. In parallel, hospitals had to lose money in the process, too. They were already reeling after the implementation of the Drugs (and Prices) Control Order (DPCO) 2013, which placed caps on the prices of various essential drugs.
In the first three years of its first term, the NDA government accused hospitals as well as other private healthcare players in the drugs and devices market of profiteering.
The government widened the ambit of the DPCO, allowing it to cap prices of essential medical devices like stents and implants as well. We predicted that capping prices for these devices would hobble the market, choking imports and, ultimately, leaving patients weaker.
Add Ayushman Bharat to the mix and hospitals have been pushed to the brink.
The government, for its part, is painting a rosy picture of Ayushman Bharat, its big banner healthcare initiative. As of October 2019, hospitalisations worth Rs 7,160 crore ($1 billion) were covered by the scheme.
When we wrote about the scheme shortly after it launched, the main drawback was the pricing. The rates prescribed by the government for some procedures and treatments were as low as 10% of private hospitals’ rack rates. This left many hospitals unwilling to be empanelled.
Hospitals in the ICU
To be sure, the hurt in the hospital space began even before Ayushman Bharat was rolled out.
In 2017, we wrote that big hospital chains like Max Healthcare and Fortis Healthcare were losing money. This kicked off a race amongst private equity firms to buy the beleaguered chains. While Fortis initially sought to strike a deal with Manipal Health Enterprises in 2018, it eventually struck a deal with Malaysia’s IHH Healthcare Bhd. In 2019, Radiant Life Care, a two-hospital chain, along with private equity investor KKR bought a controlling stake in Max Healthcare.
In a story written during the 2019 Lok Sabha elections, we illustrated how Ayushman Bharat and the DPCO worked together to drag down the sector—lower margins from medical devices and drugs on one hand, and significantly lower rack rates from procedures on the other.
Smaller hospitals, on the other hand, were forced to sell out to larger players. According to our 2018 story, at least 175 hospitals across the country were looking for buyers, while some, such as Shalby, Aster DM, and KIMS Hospital, went public.