How sick is that, Pranab da?

The finance minister’s proposal to levy five percent tax on all services provided by centrally air-conditioned private hospitals with at least 25 beds is unprecedented and unconscionable


Sonal Matharu | March 20, 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.   

Amit Sengupta, joint convener, Jan Swasthya Abhiyan (JSA), a coalition of civil society organisations, non-governmental organisations, social activists, health professionals, academics and researchers, says such a levy could make sense only if the government had first succeeded in fixing the public health system. He argues that if the idea was to charge high-end treatments, the government should have simultaneously created a mechanism to channel the receipts from this levy to the public health system. “In the absence of proper public healthcare, there is a lot of distressed migration to the private sector,” Sengupta points out, “Moreover, the expenditure in private sector includes the cost of in-patient and out-patient treatment. It is difficult to say which of the hospital’s services were used.”

The finance minister’s implicit suggestion that people turn to high-end treatments in private hospitals out of choice has reignited the debate on the government’s withdrawal from this critical sector. Suhas Borker, convener, Working Group on Alternative Strategies, a civil society think tank, says it should be obvious to everybody that only a microscopic minority in the country can afford expensive surgeries like that of the heart and the brain. “Rural indebtedness on account of paying for critical care will increase further. The poor will be pressed harder against the wall,” says Borker. He adds that if the idea was to tax only the super-speciality hospitals, the budget should have spelt it out as such. “This is not a well thought out proposal. It is symptomatic of the mindset of the government regarding healthcare,” he says.

In a country where just one percent of the population is covered under some form of health insurance, the proposed service tax has surely hit where it hurts the most.

Renowned cardiologist Dr Devi Shetty, who has spearheaded a campaign against the proposed levy, calls it “misery tax”. “For your information, not a single operation theatre or blood bank can legally function without air-conditioning,” Dr Shetty clarifies in his widely-circulated ‘A Letter to the Aam Aadmi’.

The fact is that no hospital or diagnostic centre can get a quality certification unless it is centrally air-conditioned. Window air-conditioners and split air-conditioners can lead to microorganism growth which can spread infection. In other words, the proposed tax will be applicable not only to the super-speciality corporate hospitals but also to the small and medium-level hospitals. Even if a patient is admitted to a non air-conditioned segment of a partially air-conditioned hospital, the bill will include service tax.

“If you undergo any heart surgery, you must pay Rs 5,000 to Rs 10,000 or more as service tax. If you are unfortunate and suffer from cancer, then you will be charged anywhere in excess of Rs 20,000 as service tax,” Dr Shetty’s letter reads further.

Such a tax is not levied anywhere in the world, says PN Arora, managing director of Yashoda hospital in national capital region’s Ghaziabad. “Service tax is not charged in hospitals anywhere in the world,” says Arora, “In fact, governments provide healthcare to their citizens. In India, the government indirectly collects taxes from the people for healthcare, education and infrastructure. It is liable to provide healthcare to its citizens.”

The proposed levy is restricted to the private hospitals, but that is little solace to Ravjot Singh’s parents. They have had a nasty brush with the government hospitals in Delhi, including the country’s premier medical institution, All India Institute of Medical Sciences (AIIMS), and GB Pant hospital. “I would run after the doctor in the hospital corridors and he would prescribe some medicine without even looking at my son whose condition used to be so bad that he could not even keep his eyes open with pain. The doctor couldn’t care less,” says Manmohan Kaur.

In sheer desperation, the family turned to a private neurologist. Four brain surgeries later, Ravjot stopped eating and drinking. He was disoriented and stopped recognising his family members. He almost escaped death when the blood clots in his leg once reached his lungs and heart. The family turned to AIIMS, where a doctor threw back the file on them, saying, “It is not my job to take cases spoiled by private hospitals.” Shunned by the premier central government hospital, the family had to return to the clutches of the private healthcare centres.

“Patients are left lying on the floor because the government hospitals cannot refuse treatment to patients and at the same time they do not have the infrastructure to treat all patients,” says Arora, “With this new policy, if the patient is forced to turn to a private hospital and pay everything out-of-pocket, the government wants a share in that too. The fact that a patient has to seek treatment from a private hospital is in itself a failure of the government.”
Even if the government responds to the mounting criticism and rolls back the proposal ahead of the crucial assembly polls in five states, Mukherjee’s budget for 2011-12 is sure to be remembered for the government’s designs to make money off the sick who seek healthcare outside of the public health system which is not equipped to treat them anyway.



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