The Government has agreed to look into some of the key recommendations made in the CII-Mckinsey study on Healthcare sector in India. The recommendations are related to the initiatives that the government should undertake to facilitate the growth and development of the sector. Shatrughan Sinha, Minister for Health and Family Welfare, appreciated some of the key suggestions related to manpower development, promoting private sector health insurance, setting up of minimum standards for healthcare facilities and the role for a private-public partnership.

Addressing a seminar on Healthcare in India: The Road Ahead, organized by CII and Indian Health Federation and on the occasion of the launch of the CII-Mckinsey Healthcare Study here on October 26, 2002, the Minister said that Government spending on the Healthcare sector is expected to go up significantly in the coming years and will be around six percent of GDP by 2010. Of the total government spending on the sector, two per cent will be spent on public health alone.

Stating that the National Health Policy of 2002 envisages increased fund allocation for the sector in the coming years, the Minister said that the government spending on the sector will go up to 2 per cent of GDP by 2005 from the present 0.9 per cent. Out of the increased government spending, 55 per cent of the fund will be devoted for providing primary medical facilities, 35 per cent for secondary and the rest 10 per cent for tertiary medical and health facilities. A code of ethics has also been included in the NHP 2002 to ensure that patients have the right of access to information, he said. A Medical Grants Commission will also be set up for improving the standards of education in the medical colleges of the country, Sinha said.

The Minister was also of the view that areas where private sector can provide help to the public sector should be identified in order to build a private-partner partnership. Urging industry to work in partnership with the government, Dr Pratap C Reddy, Chairman, Apollo Hospitals, Group, said that a mechanism should be created whereby it should be mandatory that all citizens are provided adequate health care facilities and should be covered under health insurance. He also stressed that healthcare sector can be major driver for economic growth as it enhances employment opportunity.

S P Aggarwal, Director General, Health Services, said that more focus should be laid on improving R&D and on creating investment for the sector. However, the government should provide enough incentive to facilitate investment into the sector.

Gautam Kumra, Principal, McKinsey & Co. Inc and Dr. Ajay Dhankhar, Associate Principal, McKinsey & Co. Inc summarized the salient findings in the report identifying key opportunities and challenges in the Indian Healthcare. Although Rs. 86,000 crore is spent on Healthcare delivery in India annually, the sector is fragmented and the delivery mechanism is inefficient. The report is directed towards defining a roadmap to what the sector could become and how to reach that goal, they said.

According to the CII-Mckinsey report, the combination of limited coverage, inefficient purchasing and poor delivery has let the poor performance of the healthcare sector. However, the growth potential in the sector is tremendous. The study estimates that, healthcare spending will increase from Rs. 86,000 crore in 2000-2001 to Rs. 200,000 crore in 2012. This will require a supporting investment of a Rs. 100,000 crore, 80 per cent of which will have to come from the private sector, they pointed out.

The private healthcare will continue to be the largest component of healthcare spending in 2012 and is likely to more than double from today's Rs. 69,000 crore to Rs. 1,56,000 crore. It could rise by an additional Rs. 39,000 crore if health insurance cover becomes available to the rich and the middle class. In addition, public spending could double from today's Rs. 17,000 crore if the government reaches its largest spending level of 2 per cent of GDP, up from 0.9 per cent today. Coupled with the expected increase in the pharmaceutical market in India could increase from Rs. 103,000 crore today (5.2 per cent of GDP) to Rs. 232,000 crore to Rs. 320,000 crore (6.2 percent to 8.5 per cent of GDP) by 2012.

The report argues that the spending pattern will change dramatically by 2012. Of the expected Rs. 156,000 crore private healthcare spending in 2012, inpatient spending will account for 47 per cent, up from 39 per cent in 2001. This growth will be driven by the rise in life style diseases, especially cancer and cardiovascular disease. These two diseases alone will constitute more than 35 per cent of the inpatient spend. Outpatient spend will decrease in terms of share but increase in absolute terms to Rs. 74,000 crore. Lifestyle diseases such as asthma, cancer, heart disease and masculoskeletal diseases will drive this increase.

According to the report, the Government should stimulate private investment in healthcare by according infrastructure status to the healthcare sector. Moreover, it should incentivise private spending in the locations that require more attention through concessions in land cost, provision of tax holidays and exemption of custom duty on imported consumables. In order to provide the quality health facilities, the report has urged the government to define and enforce minimum standards for healthcare facilities and make it mandatory across all parts of the country.

The CII-Mckinsey study has further suggested that the Government should stimulate the growth of private, social and community insurance to increase the level of coverage through prepayment. Private health insurance should be recognized as separate line of business by the government. It should reduce the capital requirements for health insurers to Rs 30-50 crore from the existing Rs 100 crore.

Dr. Naresh Trehan, Chairman, CII National Committee on Healthcare & Executive Director, Escorts Heart Institute & Research Centre, in his opening remarks emphasized the dismal state of Healthcare in India. Although the volume of expenditure in Healthcare is large, the penetration and quality of service is not comparable to the best Health service available even in Asia. This set the context for the present CII-McKinsey Healthcare Study. The initiative, to make an in depth analysis of the Indian Healthcare Sector, was taken a year ago. The one question that propelled the study was how do we catch up with the rest of the Asian countries in ten years time.