Onsurity Editorial
November 29, 2024
8 min read
262Table of Contents
Medical Inflation in India
Today, it’s become nearly impossible for a common man to pay for in-patient care or medical bills out of their pockets. Can you imagine paying for an organ transplant surgery, which typically ranges from Rs. 20 Lacs to Rs. 80 Lacs, without any financial cover?
According to the Acko India Health Insurance Index 2024, the healthcare costs in India are increasing at an annual rate of 14%. The index further revealed that 23% of this hospital cost in India is funded through borrowings and a whopping 62% is paid out of pocket. Not only is this adding financial strain on families but it is also preventing them from getting quality medical care.
The increase in healthcare costs can be due to various factors, such as – a shortage of healthcare professionals, an increase in demand for healthcare services, and an increase in the costs of medical equipment. However, another major contributing factor to this is medical inflation.
In this article, we’ll talk about how medical inflation in India is causing a dent in the health insurance space while making premiums expensive. Also, get to learn about the ways you can manage the burden of increasing healthcare and health insurance costs.
But first, let’s try to understand what medical inflation is and how it works!
What Is Medical Inflation?
The term medical inflation is used when there is a steady increase in the cost of various healthcare services, such as – medicines, diagnostic tests, doctor’s fees, health insurance premiums, and hospitalisation charges. As of September 25, 2024, the medical inflation rate in India stood at 14%, the highest rate among Asian countries including China.
What Is Causing Medical Inflation In India?
1. Technological Advancements
Various advancements in technology like – modern medical equipment, AI testing, and diagnostics, new and improved surgical technology have drastically improved medical outcomes. However, the procurement, development, research, and training for these technologies come at a considerably high cost to healthcare providers. Thereby, translating into a high-cost burden for the patients.
2. Medical Tourism
India has been world-renowned for its advanced medicine and cost-effective healthcare compared to most countries. This has attracted people travelling from around the world to get the treatment done in India.
Global travellers go for a range of medical procedures, including – Cardiology, Orthopedic surgeries, Cosmetic surgery, Dental care, Oncology, and Ophthalmology. This results in an increase in demand contributing to the overall cost of healthcare.
3. Rising Instances Of Chronic Illness
In the post-COVID era, chronic diseases like diabetes, hypertension, heart disease, cancer, and respiratory illnesses have become more prevalent. According to the India Wellness Index 2023, 35% of the contenders of the survey reported instances of the aforementioned chronic conditions.
These rising incidents not only signal the concerning state of the country’s overall wellness but also caution against a possible uptick in medical inflation in the years to come. Due to the long cycle of patient care, repeat consultation, and medication, the medical expenses become recurring in nature thereby contributing to inflation.
4. Growing Demand For Quality Healthcare
In a populous country like India, an increase in demand for healthcare services can cause an insurmountable level of pressure on the healthcare system. This increase in demand, without a synonymous increase in supply or efficiency pushes up the healthcare costs, resulting in medical inflation.
5. Shortage of Healthcare Professionals
India has a shortage of doctors, specially in rural areas. As of 2020, there were approximately 0.7 doctors per 1000 patients. Furthermore, there’s an 80% shortage of specialist doctors in rural areas.
In addition to this, various other medical professionals like nurses and administrators are opting for emigration for better opportunities, leaving India’s healthcare sector heavily understaffed. The gap between growing demand for quality care is being unmet due to the shortage of qualified specialists and it’s ultimately contributing to inflation.
Also read: The Health Challenges of India’s Tech Professionals
How Medical Inflation Is Impacting Health Insurance Premiums?
Health insurance providers base their policy premiums on various factors, however, one of the most crucial factors is the cost of healthcare services. And it has a direct and profound impact on health insurance premiums. So, in an inflationary period here are some of the ways your health insurance policy and premium get impacted:
1. Increased Premiums To Offset Costs
If you are a policyholder then you would have noticed a gradual but significant increase in the premium cost for the coverage that you got at a lower cost a few years ago. This is because the premiums have been increasing in tandem with medical inflation. Insurance companies adjust their premium amounts to offset potential losses from claim payouts when the cost of treatment increases.
2. Impact On Senior Citizens And People With Pre-Existing Diseases
Insurance companies subsequently hike the premiums for senior citizens and people with pre-existing diseases. This is mainly due to the exuberant treatment costs and higher compensations needed for the healthcare of this vulnerable group.
3. Age Group-Specific Premium Adjustment
Health insurance premiums increase every five years by 10-20%. For example, Ajay, a 40-year-old might pay Rs. 5,000 for a mid-level health insurance plan but Vignesh, a 60-year-old will pay Rs. 6,000 for the same coverage.
This is mainly due to the higher health risks associated with old age. Now this increase may not bear a direct correlation with medical inflation but an overall increase in healthcare costs will also have a drastic impact on the percentage increase while transitioning from one age bracket to the other.
4. Limited Coverage For Specific Diseases
Insurers may curb coverage for specific high-risk diseases or expensive procedures in an inflationary period. This limitation can impact policyholders who have some pre-existing conditions or are suffering from chronic illnesses. There may be very few comprehensive policy options available at an affordable rate.
Health insurance provides the necessary financial cover for middle and low-income groups. However, the increase in health insurance premiums is adversely impacting the way this demographic procures healthcare services. Due to the rising costs of medical treatments, a basic health insurance policy can not provide comprehensive coverage.
In such cases, individuals often end up paying out of pocket or borrowing, which further adds to their financial strain. So, when it comes to coping with the burgeoning costs of medical services and insurance there is very little room for respite. With that being said, there are a few ways one can manage and optimise their insurance policy for the best outcomes.
Related read: Comprehensive Health Insurance Vs Disease Specific Insurance
How To Manage Health Insurance Premiums During Medical Inflation?
1. Get Health Insurance At A Young Age
Getting health insurance as early as possible saves you lakhs in medical bills later on. Not only that but getting it at a young age is less expensive and better for your finances. Additionally, you can claim tax benefits on the premium paid against your insurance policy under Section 80D of the Income Tax Act.
2. Focus On Preventive Healthcare And Wellness
By maintaining a healthy lifestyle you reduce your chances of contracting chronic diseases like – diabetes, cancer, heart diseases, and more. Additionally, regularly getting preventive health check-ups can flag any underlying health conditions, prepare you better for the future, and help lower your claim.
3. Opt For A No-Claim Bonus Insurance
Many insurers reward policyholders with no-claim bonus benefits. A no-claim bonus is a reward given to policyholder upon the non-usage of their insurance coverage during the policy period. The benefits typically include an increase in coverage or a discount on premiums. It is a good way to improve policy coverage and combat the rising medical inflation.
4. Leverage Top-Up And Super Top-Up
Increasing the base sum insured is costly. However, you can opt for a top-up or super top-up, over and above your existing policy coverage. Upon exhausting the base coverage, the top-up is activated, offering you an economical way to mitigate healthcare costs without significantly increasing premiums.
5. Utilise Employer-Sponsored Group Health Insurance
A group health insurance policy is typically offered by an employer to their employees. You can check with your employer regarding your group policy as an additional way to safeguard you during unforeseen medical emergencies.
Group health insurance policies have more cutting-edge benefits compared to the individual insurance policy. Most group policies have no waiting period and cover pre-existing diseases. Additionally, your group policy is typically paid for by your employer so you don’t have to worry about the additional out-of-pocket expense.
Quick read: Pre and Post-Hospitalisation Expenses
Future-Proof Yourself Against Medical Inflation
In the wake of technological advancements, increasing prevalence of chronic diseases, and growing demand for quality care, the healthcare industry is grappling with an imbalance in supply and demand resulting in increased healthcare costs. To mitigate this, the insurers are revising premiums frequently. Ultimately, the policyholders are bearing the burden of this.
That being said, life and its events are often unpredictable. You should leave no stone unturned to safeguard yourself and your loved ones against such unforeseeable health crises. Future-proof yourself against the impact of medical inflation by adding additional financial coverage like – setting up medical emergency funds, getting critical illness cover, and asking your employer for group health insurance membership.
If your current employer doesn’t have you on a group health insurance plan then introduce them to Onsurity’s comprehensive health and wellness benefits. The healthcare membership offers insurance coverage, preventive healthcare, and wellness benefits, all at a monthly subscription of just Rs. 145 per employee.
