Impact of Health Inflation in India • RoboAdviso | Best Blog for Mutual Fund and Investment in India

Impact of Health Inflation in India

Roboadviso     Asset Allocation,Financial Planning     Posted On, Sun 14th August, 2016     No comments
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In our earlier post, we discussed about how inflation in the services sector rises faster than food inflation. We had touched about the escalating inflation in the education sector. Let us now look at the impact of inflation in the health sector.

The CPI states that costs for hospitalization and nursing are 8.26 percent in June 2016, a marked rise from 6.8 percent in the previous year. The real unofficial figure is much higher, inflation in the health and medical industry is at a worrying 13 to 15 percent, leading to a steep rise in health insurance premium rates.

The NSSO (National Sample Survey Organization) survey put the medical inflation at 10. 7 percent in 2014, taking into account the escalation in costs since 2004. In an urban setup, the average hospitalization cost was Rs. 5,695 in 2004; this figure increased to Rs. 14,935 in 2014. The costs of critical illness have also increased by 12 to 15 percent.

[ctt template=”1″ link=”mcP53″ via=”no” ]Health Inflation is high in India – Plan and Invest Prudently[/ctt]

There has been a marked increase in lifestyle diseases across the years. The NSSO study showed that while only 54 people out of 1000 people in urban areas were deemed ‘ailing’ in the year 1996, the figure went up to 99 in 2004 and in 118 in 2014.

Compared to other emerging economies like China, Mexico, Brazil, Sri Lanka and Indonesia, India has the highest number of people prone to diseases and subsequent lack of medical attention. Even countries that are rated poorer than India, like Bangladesh and Nepal fare better in the health sector. While, it is commendable that as a country we have done well in moving out of poverty, we still lag behind tremendously in healthcare.

Why are costs in the health sector rising at such steep levels?
Increase in population and corruption in the medical sector have added to the rise in medical costs. The infrastructure in the healthcare sector is not enough to meet the rapidly increasing demand. WHO (World Health Organization) states that there are only 80 doctors per 1 lakh population in India, compared to 130 in China. If one removes doctors with dubious records and concentrates only on the ones with valid medical qualification, the figure is a shocking 36 doctors per 1 lakh population.

India is known for vast number of bottlenecks, corruption and neglect in the public health sector which is why almost 80 percent of ailments are treated in private hospitals. Increasing dependency on the private sector give these hospitals enough leeway to impose high charges on treatment.

The road ahead
It is laudable that the average life expectancy in India is on a steady rise. The UN projections states that while it is 68 now, it will increase to 71.7 in 2025 and 75.9 in 2045. Increasing life span also implies rising healthcare costs to manage non-communicable diseases like cardiovascular conditions, diabetes, respiratory diseases, cancers etc. There are admirable advancements being made in the world of healthcare to treat many critical illnesses. As the country participates in these advancements and brings about specialized medical care, there is bound to be more demand for them.

To tide over medical inflation and to ensure that we have the best of health care, we will need to be adequately insured and have a well thought financial plan in place. Apply for a good health insurance plan with critical illness riders, so that it does not dent your finances whenever you require medical treatment. These are not expenses but vital investments towards your health.

Also, built a contingency fund by investing in good debt fund by investing 10 percent (or any percentage you deem good enough) of your monthly income so that you have access to a financial reserve, whenever the need arises.

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