The healthcare tax: Why FM's move would have been a sick one

The government corrected its course repealing the service tax on healthcare

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Sonal Matharu | March 22, 2011




Ravjot Singh was all of 12 years old when he was diagnosed with multiple neurocysticercosis – a parasitic disease of the nervous system which causes recurrent epileptic seizures. That was a decade ago. Since then, his treatment has been the sole concern of his parents. His father gave up full-time work because somebody needed to be around him all the time. His mother had little choice but to soldier on as professor at a Delhi University college. What hurt them most was that they could not depend on the government hospitals. Rushing from one private hospital to the next, they soon exhausted their savings and have been carrying on only because of sustained assistance from relatives, friends and well-wishers. “There came a time when I had to call up my sister and ask her to sell my gold jewellery,” his mother Manmohan Kaur recounts, “We just couldn’t pay the hospital bills which ran into lakhs of rupees.”

Finance minister Pranab Mukherjee has just added to the financial burden of this family, and numerous other such families which have been facing adversity with little help from the government.

“I imposed service tax in 2010-11 on health check-up or treatment. This levy has resulted in differential treatment between persons who make payments themselves and others where payments are made by an insurance company or a business entity. Thus, I propose to replace it with a tax on all services provided by hospitals with 25 or more beds that have the facility of central air-conditioning,” the finance minister read out in his budget speech, “Though the tax is on high-end treatment, I propose to sweeten the pill by an abatement of 50 percent so that the actual burden is kept at 5 percent of the value of service. I also propose to extend the levy to diagnostic tests of all kinds with the same rate of abatement. However, all government hospitals shall be outside this levy.”  

The 50 percent abatement notwithstanding, Ravjot Singh’s parents are livid at the government’s designs to profit from their misfortune.

Each time a doctor prescribes a blood test, which is of course very often, the family needs to call a lab assistant home to collect samples. The private lab charges Rs 250 extra for home service. Similarly, the family needs to call doctors home frequently because Ravjot has developed a phobia of hospitals – and the doctors charge a minimum of Rs 1,500 for each visit.

“We haven’t been able to repay the money we owe our relatives,” says Manmohan Kaur, whose 85-year-old mother-in-law also lives with the family and has been bed-ridden for more than four years because of a disjointed hip bone. Besides the medical expenses, the family also pays a full-time maid to nurse her. The doctor-on-call’s fee and the expenditure on medicines add up to no less than Rs 15,000 every month. Kaur gets a small amount as reimbursement from the government employees’ health insurance scheme, but empanelled doctors don’t do home visits and the family’s out-of-pocket expenses continue to remain beyond their reach.

These out-of-pocket expenses are bound to rise further, thanks to what the finance minister termed as “high-end treatment”. For every Rs 15,000, the family will have to cough up Rs 750 extra to satiate the government’s tax hunger.
Health experts and activists believe the entire philosophy behind this tax proposal is seriously flawed.

Vinay Aggarwal, president of Indian Medical Association, says the proposed service tax on private hospitals and diagnostic centres is not really on the health services but rather on the diseases and the diseased. Private healthcare centres will simply pass on the levy to their clients, says Aggarwal.   

Read the rest of this piece in the latest issue of Governance Now magazine - March 16-31 (Vol.02, Issue 04).


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