As part of the tax rate rationalization exercise, the Goods and Services Taxation Council imposed a 5% GST on non-ICU hospital beds whose rent exceeds Rs 5,000 per day.
The imposition of the GST drew criticism from the opposition, while stakeholders including hospital associations raised concerns that the GST on hospital beds would increase the cost of healthcare for patients in the absence of a tax credit. entrance to hospitals. This will also introduce compliance and related challenges for the healthcare sector, which is otherwise exempt from GST.
“Typically, bed charges make up about 10-12% of the average medical spend per hospital stay in for-profit hospitals,” said Mythri Macherla, ICRA Deputy Vice President and Sector Director. “In the absence of an input tax credit, we expect hospitals to pass the tax on to patients, making it largely credit-neutral for hospitals. However, since in most cases hospitals tend to offer packages for various treatments, calculating the cost of the bed separately is likely to be challenging and clarity on this is awaited.”
Naresh Sheth, a partner at tax and audit services provider NA Shah Associates, said the additional tax will surely create an additional burden for patients, as no hospital would bear such a large fiscal cost.
Let us take an example of a corporate hospital that treats 200 patients in a day and charges Rs. 6,000 rental rooms per day. The tax output per day will be Rs 60,000 in such a case and it turns out to be Rs 2.19 crore for the hospital in a year.
The proposed tax levy, as well as being somewhat unfair, would be prone to litigation as it is not in line with the legal provision that prescribes the tax treatment of compound supply, he added.
Sandhya J, group finance director at Narayana Health, said it’s not fair to add GST and burden patients who don’t come to the hospital by choice but are in extreme pain and misery.
“Health insurance is very little penetrated in our country. Many times, people have to sell their jewelry and property to pay for medical care. There are hundreds of avenues available for the government to raise revenue. The last thing they should touch is healthcare. Not in our country, not in any country,” she said.
When asked if hospitals will have to pass the additional tax, Sandhya J said that the government somehow wants hospitals to pass the tax on to patients, or else they would have offset the input tax.
“Due to inefficient tax structures and poor reimbursement from government schemes, hospitals are under tremendous pressure in terms of their margins. So this comes to mind,” he said.
All the tax will be on the cost, he added. Reducing the cost of health care is a key priority for the government, and hospitals have been lobbying to provide a zero-rate exit tax for health care to take advantage of the entry credit. Instead, the government has introduced an additional tax without providing any compensation input, the financial director said.
Ergo, in a blog post, said that 75% of the Indian population pays for health care services out of their own pocket, as health insurance penetration remains low in a country where the health system is in “bad condition”. state” due to low public spending on health care and the absence of concrete measures. regulatory policies.
According to policy think tank Niti Aayog, nearly 30% or Rs 42 crore of India’s population lacks health insurance, with the actual figures being higher due to gaps in the existing scheme and overlap between schemes. The Insurance Regulatory and Development Authority of India in its 2021 annual report said health and P&C companies have covered Rs 51.47 crore of lives, where 66.62% of lives were covered by plans. government-sponsored health insurance and 10.32% of lives were covered by individual policies. .
However, in reality, most patients find it extremely difficult to get a hospital bed if they want reimbursement under government-sponsored schemes.
Ria Sarkar, who had her father admitted to a reputable Kolkata hospital for cardiac arrest, said she was hesitant to file a claim under the government’s health insurance scheme.
“The hospital said they need to put in a stent and they won’t provide a top-notch one if my father has to use government health insurance,” he said. “I think all patients are amateurs when it comes to treatment processes and all we think about is saving our lives, even at the cost of giving up all our hard-earned money.”
Sarkar was asked to pay Rs. Rs 4 lakhs for coronary angioplasty, stent insertion and a three-night stay.
On the other hand, many insurance policies do not cover the full value of bed charges and it remains to be seen whether insurance providers will reimburse the additional tax.
Ranjeet Mahtani, a partner at the tax and regulatory firm Dhruva Advisors, said one issue that can arise is whether the insured can take advantage of
of the GST collected by the hospital and simultaneously have reimbursement from the insurance company.
The levying of the GST will prove to be both inflationary and onerous for consumers or patients, he said, adding that insurance premiums could potentially increase as insurers will also have to reimburse the additional tax component.
Inquiries to two major insurance providers about the possibilities of higher premiums following the imposition of the GST rate have so far gone unanswered.
Out-of-pocket spending, which is a payment one makes with one’s own money outside of reimbursements, is also relatively high in a country with a low per capita income. Niti Aayog in a study said that the average out-of-pocket expense for India is estimated at Rs 14,660. It is Rs 21,564 for children under one year of age. High out-of-pocket costs will also threaten to limit the achievement of universal health coverage.
According to Practo, the average cost of cancer treatment in India is Rs. 5 lakhs and can skyrocket up to nearly Rs. 30 lakhs in India.
India’s Treasury Secretary Tarun Bajaj has stated that the 5% GST on non-ICU hospital rooms costing more than Rs 5,000 will not affect affordable healthcare for a large part of the population. people and that the impact of the tax would be minuscule.
However, with such inflated hospital bills, patients in all economic sections are poised for financial shock and healthcare debt.
Inflation has already hit citizens hard amid supply bottlenecks due to the conflict between Russia and Ukraine shortly after the pandemic that left millions out of work in India alone. While Indians have to cough up a lot more on items ranging from milk to cars, getting hospitalized is therefore another nightmare.