The healthcare industry in India has changed. With the advent of private hospitals, we are witnessing great improvements in the quality of care, but we are also witnessing a significant increase in the cost of care. As private hospitals increasingly become the first choice for care of our loved ones, it drives up the average cost of hospitalizations, procedures and tests. A World Health Organization report in 2011 stated that the private sector accounts for 68% of healthcare spending in India. For those of us living in India, it comes down to choosing between unaffordable private medical care that exceeds our insurance coverage, or going to public hospitals and waiting in endless queues for basic treatment.
Current inflation rates
It is well known that medical inflation greatly exceeds overall inflation. The often quoted figure for healthcare inflation in India is 15% per year, compared to an overall inflation of 6-7% in recent years. Since the second wave of Covid-19, these costs are reaching new heights. Medical inflation has now reached around 18-20%. Think about your health insurance coverage and ask yourself if it would be adequate even five years from now, at this rate of inflation.
India has its own particular reasons for medical inflation. In a country of over a billion people, we have an acute shortage of qualified health care experts. Brain drain syndrome means that while large numbers of Indians train to become surgeons and specialists, very few end up working in India. The scarcity of these specialists drives up salaries and limits those who can afford them. Diagnostic equipment is often imported and expensive. The same goes for most technologies used in healthcare – India generally follows models developed in the West.
Then there are the sick. More and more patients are opting for higher room categories and extended hospital stays. As a result, hospitals are using more space to cater to this small category of patients, while the space available for the masses is shrinking. Once again, the principles of supply and demand drive up prices for mid-range and low-end hospital rooms.
Cost implications of medical inflation
Let us understand the impact of inflation on hospitalization costs: a treatment procedure that costs Rs 10 lakh today will cost Rs 40 lakh after 10 years, assuming a medical inflation rate of 15%. It will rise to Rs 1.6 crore in 20 years. Consider your current health, lifestyle and medical history; and try to imagine what your health might look like in 20 years. For most of us, this paints a rather gloomy picture.
Fight against medical inflation
With medical inflation as it is, you will need more health insurance coverage than you imagined. The cost of treatment has increased, especially for serious conditions. In cases where the patient has to stay in the hospital for an extended period of time, the medical costs skyrocket.
It is essential to purchase health insurance after taking into account the likely cost and inflation in 20-30 years. It’s a good idea to buy higher covers – the younger the applicant, the higher the cover should be as they have more years to support. In fact, health insurance companies have also started offering higher covers of up to three crore rupees.
You can do a lot to extend the coverage offered by your current plan. Supplemental plans are a great way to add coverage to existing basic coverage. If your expenses exceed the coverage provided by the basic plan, the top-up takes care of it. You might also consider getting a new policy that has broad coverage and has inclusions that suit you better.
With the increase in medical inflation, having health insurance is becoming a necessity. The current lifestyle that many of us follow, the way we live and work, and the incidence of pollution where we live, all contribute to increased rates of disease and infection. We need to contribute to our own health in many ways. Taking better care of our diet, exercising regularly, proactive testing and regular wellness visits to the doctor all play a role. However, in the final analysis, being able to afford the treatments you need becomes the most important factor in your recovery.
Give yourself the best chance of fighting illnesses with the right health insurance policy that provides you with adequate coverage.
(Anuradha Sriram is Chief Actuary, Aditya Birla Health Insurance)
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Published on: Sunday, May 22, 2022, 07:00 IST