beyondbrics

India may have completed two decades of market-oriented economic liberalisation. But its’ deep-rooted socialist mindset – especially attitudes about the poor, and how they live, or should live – are hard to shake.

That is apparent in a particularly bizarre approach to a new service tax on health care in the budget unveiled by Pranab Mukherjee, the finance minister, on Monday.

India’s Congress-led government wants to impose a 5 per cent service tax on all medical care – and diagnostic tests – conducted at private hospitals, including major private hospital chains such as Apollo, Fortis, and Columbia Asia, and smaller, less elite facilities.

But in a bid to shield the poor from rising health care costs, the government has declared that patients obtaining treatment at small hospitals – with less than 25 beds – or hospitals that lack central air conditioning – will be exempt from this tax.

The assumption, apparently, is that if you can pay for a hospital with central air conditioning you can afford to pay an additional 5 per cent tax to India’s government.

Yet that arbitrary diving line reflects little understanding of how the poor approach health care, given the grim reality at government hospitals – which are in a state of almost total collapse, due to chronic under-funding. Given the squalid conditions at many state facilities, only the most destitute Indians resort to them.

Most Indian families – no matter how poor – will beg or borrow, if not steal, to get loved ones into a private hospital, especially extreme health emergencies, but also for more routine care.

In India, nearly 80 per cent of the country’s total health care spending is borne by private households – an astonishing figure given the large numbers of the population still at or barely above the poverty line. By contrast, government spending on health care, around 0.9 per cent of GDP, is one of the lowest rates in the world.

Medical emergencies are one of the main causes of household indebtedness, often responsible for pushing families back into poverty, as they are forced to bear hefty costs. But families will try to obtain the best cared within their means, especially when the patient is the family breadwinner, which often means turning to a costly private hospital.

It is questionable whether it is really fair to consider air conditioning in a hospital luxury, given India’s blistering average summer temperatures exceeding 40 degrees – and often hit as high as 48.

India’s government has shamefully neglected its obligation to provide decent quality health services to the rural and urban poor, which has driven even the poor to resort to private care. That is now fuelling a boom in private hospitals – small, medium and large – to cater to the huge pent demand for quality medical treatment.

For the government to now impose a tax on private health care – and then to draw up some totally arbitrary criteria which it thinks will shield the poor from this extra cost – is the height of callousness. Cleaning up its embarrassing public hospitals – to give the poor a real alternative to private care – should come first.

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