India should raise government health expenditure to 5 percent of GDP over the next five years, a Parliamentary Standing Committee has recommended, calling for a sharp increase in public spending on healthcare after the country failed to meet the target set under the National Health Policy 2017.
The Department-related Parliamentary Standing Committee on Health and Family Welfare, in its report on Affordability and Accessibility of Healthcare Facilities in Public and Private Sector, said healthcare needs to be treated as a foundational pillar of socio-economic development, requiring sustained investment in public health infrastructure, preventive care and equitable delivery of services.
“The Committee, therefore, reiterates its recommendation in the 172nd Report that a strategic revision of the NHP target, mandating a rapid escalation of government health expenditure to 5% of GDP over the next five years to ensure robust and comprehensive healthcare expansion,” the report said.
The recommendation represents a significant increase over the target set under the National Health Policy (NHP) 2017, which envisaged raising government health expenditure to 2.5 percent of GDP by 2025.
Government health expenditure increased from 1.35 percent of GDP in 2017-18 to 1.43 percent in 2022-23, according to the report, leaving it substantially below the NHP target.
The report noted that government health expenditure had temporarily climbed to 1.84 percent of GDP in 2021-22, but described the increase as an “anomaly” driven by one-off expenditure on Covid relief and vaccination.
The committee's recommendation also goes beyond the position put forward by the All India Institute of Medical Sciences (AIIMS) during its submission to the panel. AIIMS had suggested progressively increasing public health expenditure to 2.5-3 percent of GDP to strengthen infrastructure and the health workforce, improve availability of medicines and diagnostics, and reduce out-of-pocket expenditure.
High out-of-pocket costs remain a concern
The push for higher government expenditure comes against the backdrop of continued dependence on household spending to finance healthcare.
Medicines remain a particularly large source of expenditure. Total pharmaceutical expenditure accounts for nearly 30 percent of Current Health Expenditure, while pharmacies alone account for more than 21 percent, according to the report.
The committee said pharmaceutical spending financed directly by households was one of the structural factors keeping out-of-pocket expenditure elevated.
The panel has consequently called for greater investment in public health infrastructure, preventive healthcare and equitable service delivery alongside the increase in government spending.
The committee also highlighted the absence of standardised pricing for specialised diagnostic procedures, including PET-CT scans, MRI and genetic testing.
Nearly 70 to 80 per cent of cancer treatment expenditure in India is met through out-of-pocket expenditure, it noted. The panel also flagged the high retail margins on anti-cancer medicines. Despite price regulation under the Drug Price Control Order, retail margins on such drugs remain as high as 50-60 per cent, it said.
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