Reining in healthcare costs

Medical bills are a concern, but quixotic steps are no solution

Alok Tiwari

Any Indian who has undergone treatment of even a slightly out of ordinary illness or has been hospitalized knows it is a double whammy. One blow is of illness itself and the other of the bills that follow. As an old joke goes, if the illness does not kill you the hospital bill certainly will. Runaway healthcare costs are a serious concern in India. Real medical inflation runs between 12 to 14%, almost three times the rate of general inflation, the figures of which are themselves suspect. It is estimated that on average 5 to 6 crore people are pushed into poverty each year on account of medical costs incurred on a family member. Private healthcare costs about five to six times more than in public services, which either do not exist or are so bad that anybody who can avoids them.

Hence it is nice that a parliamentary panel has sought to address this. It has proposed capping the hospitalization charges in large cities to the average tariff of a room in nearby 3-star hotels. Now, a panel report does not mean it will become a reality any time soon. It is just a recommendation. It needs to be accepted by the government that must then come up with a law. Given how concerned this government is about education and healthcare, chances of it happening are close to zero.

On paper, though, this looks like a good move. In reality, it is a patient that is dead on arrival. It begins with the fact that there is no clear definition of a 3-star hotel itself. Well, a government agency does define it in India but try finding an officially rated hotel around you. Most hotels just give the status to themselves. Even if you find officially rated ones, how would you define nearby? A hotel in a posh neighbourhood may have three times the rate of another one across the street surrounded by slums. The task of sorting through all this in every city will inevitably fall on some committee of babus who would fix things their usual way.

Besides, hospitals do not just charge room rent. The rent prima facie may look reasonable. But a whole lot of services like cleaning, laundry, nursing, oxygen supply, even airbeds if needed are charged extra. It is same for the ICUs. The basic rate is low. With all the add-ons, it can be several times the basic rate. In some of the posh hospitals in metro cities the cost of keeping a patient with serious illness can average a lakh of rupees per day or more. The panel report has suggested bundling some of the charges in the room rent but never under-estimate the creativity of big hospitals in thinking of newer ones.

Also, in principle it is not a good idea for the government to control prices of any business in a free economy. And let us not fool ourselves; hospitals are a business. Excessive control creates distortions in the economy and increases opportunities for corruption. So, can the government do anything to control rising healthcare costs and curb unethical practices in the industry? It can. It needs to regulate rather than control.

It can begin by defining what a hospital room should be. Right now, they can vary widely in size as well as amenities. A regulator should set up minimum standards for the size of room, patient as well as attendant’s beds, storage areas, air conditioning, power back up, toilet etc. It could also define certain things that must be part of the room rent. These should include basic services like cleaning, laundry, and food for the patient. There should be clear standards for width of passages and staircases, sizes of lifts, proper resting areas for staff and relatives, availability of canteen based on bed strength.

ICUs these days are little more than general wards with partition curtains and a bedside monitor. There are no standards laid down on the qualification and training of doctors and nurses that should be available 24x7. In several hospitals, junior doctors or those with ayurvedic or homoeopathic degrees man them during night. Even during day, senior consultants come only during their rounds. Facilities and staffing requirements of ICUs should be clearly defined.

The government should also probe hospitals forcing patients to buy medicines from their own pharmacy. Many big hospitals supply medicines themselves and bill the patients on MRP that are wildly inflated. There should be regulation about how much higher the MRP can be from wholesale price charged to hospitals. This should be applied to drugs as well as other tubes, syringes, needles, sutures, gloves, and other surgical aids.

It is common experience that hospitals inflate bills for patients with insurance. They charge different rates to insurance companies. While the patient may not initially be concerned about this, it eats away a larger chunk from the overall coverage under the policy. It leaves inadequate coverage in case there is another illness among family members in the same year. Differential tariffs should be barred. These standards need to be prominently displayed in reception areas in local languages, so customers know what to expect in the charges they are paying. A national helpline to report violations and deficiencies should be functional.

While these will improve services, costs would only be reined in when publicly available healthcare improves. Governments across the country are spending thousands of crores in buying votes through all manner of freebies. They should spend that on basically two freebies—education and health. There was a time when even well-to-do and VIPs sought treatment in public hospitals, before they were overwhelmed by sheer patient load and lack of resources. If they are built in adequate numbers and to required standards, private hospitals will be forced to charge reasonably or offer exceptional services. This is possible, It only needs a change in priorities.

This column appeared in Lokmat Times on Aug 20, 2026