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NEW DELHI — As the Indian government prepares to unveil the Union Budget 2026, a coalition of medical leaders and policy experts is calling for a paradigm shift in how the nation funds its physical well-being. On Tuesday, prominent voices in the healthcare sector urged the Ministry of Finance to move toward a tax-funded Universal Health Care (UHC) model, significantly increase public spending to at least 2.5% of GDP, and overhaul the current insurance-based framework to include outpatient services.
The recommendations come at a critical juncture for India’s healthcare infrastructure. While recent years have seen increased allocations for capacity building, experts argue that the “backbone” of the system—public hospitals—remains chronically underfunded, struggling to meet the demands of a population where out-of-pocket expenses still drive millions into poverty annually.
The Call for Structural Transformation
The primary demand from the medical community is a transition from fragmented insurance schemes to a comprehensive, tax-funded system. Dr. Vinay Aggarwal, past National President of the Indian Medical Association (IMA), emphasizes that the current model requires a foundational reset.
“We advocate for tax-funded Universal Health Care with a basic health package for all citizens,” Dr. Aggarwal stated. “To achieve this, we must increase public health allocation to between 2.5% and 5% of the GDP. This isn’t just about more money; it’s about strengthening government hospitals and the human resources required to run them.”
Currently, India’s public health spending hovers around 2.1% of GDP (Economic Survey 2024-25). While an improvement over previous decades, it remains below the 2.5% target set by the National Health Policy 2017 and pales in comparison to the 10-12% seen in many OECD nations.
Reforming PMJAY: Beyond Hospitalization
A central pillar of the experts’ proposal involves the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY). While the world’s largest health insurance scheme has provided a safety net for secondary and tertiary hospitalizations, experts argue it ignores a massive segment of patient needs: outpatient care.
“The government should reform PMJAY to include outpatient care, realistic package rates, and timely reimbursements,” Dr. Aggarwal noted. He also called for the introduction of Direct Benefit Transfers (DBT) and co-payment models to ensure sustainability.
Including outpatient care (GP visits, diagnostic tests, and medicines) is seen as vital. Most Indian patients seek care at the primary level; when these costs are not covered, patients often delay treatment until their condition becomes a costly, life-threatening emergency.
Addressing the “Silo” Effect
The urgency for these reforms is echoed in a recent report by The Lancet Commission, which identified significant structural weaknesses in India’s progress toward UHC. The commission noted that while policy intent is strong, execution is hampered by “fragmented governance” and “poor coordination.”
The report highlighted several key barriers:
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Institutional Silos: Healthcare services are often organized around specific buildings or programs rather than the citizen’s journey.
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Weak Referral Systems: A lack of integration between primary clinics and tertiary hospitals leads to overcrowding in specialized centers for minor ailments.
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Accountability Gaps: Operating in silos weakens the continuity of care, meaning patients often “get lost” in the system after an initial diagnosis.
“Policy intent alone is insufficient without the institutional capacity to execute reforms,” the Lancet study stressed, suggesting that India needs to move away from facility-centered care toward long-term care needs.
The “Value vs. Price” Debate in Procurement
For the medical technology sector, the focus is on how the money is spent. Aditya Banerjee, a member of the Medical Technology Association of India (MTaI), argues that the government’s procurement strategy—often favoring the lowest bidder (L1)—may be costing the country more in the long run.
“A deliberate shift in the public procurement criteria, from the lowest upfront price to the best long‑term value, is essential,” Banerjee said. He explained that high-quality equipment and consumables reduce complication rates and hospital stays, ultimately saving the taxpayer money.
Banerjee warned that without this shift, India could face the “spiralling healthcare budgets” currently seen in developed economies where the cost of managing chronic complications outweighs the cost of early, high-quality intervention.
Fiscal Incentives for Lifesaving Care
Beyond direct spending, experts are pushing for tax reforms to lower the cost of care for the end user. A key recommendation for the 2026 Budget is the GST exemption on:
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Lifesaving medical equipment.
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Medical consumables (syringes, bandages, etc.).
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All essential vaccines.
By reducing the tax burden on these items, the government could effectively lower the cost of private healthcare—which still handles nearly 70% of outpatient care in India—while making public procurement more efficient.
Public Health Implications: The Road Ahead
If the government adopts these recommendations, the implications for the average citizen are profound. A move toward 2.5% GDP spending would ideally manifest as:
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Shorter Wait Times: Better staffing in public hospitals.
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Reduced Financial Stress: Inclusion of outpatient drugs and tests under government coverage.
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Better Rural Access: Strengthening primary health centers (PHCs) to handle more than just basic screenings.
However, critics and some economists warn that a rapid shift to a purely tax-funded model could strain the national deficit. The challenge for the Finance Ministry will be balancing these urgent healthcare needs with the broader fiscal consolidation goals of the 2026-27 period.
As the budget session approaches, the message from India’s medical fraternity is clear: the era of incremental increases must end. To achieve “Health for All,” the government must treat healthcare not as an expense to be managed, but as a strategic investment in the nation’s economic future.
References
- https://tennews.in/budget-2026-experts-call-for-tax-funded-universal-health-care-enhancing-public-hospitals/
Medical Disclaimer: This article is for informational purposes only and should not be considered medical advice. Always consult with qualified healthcare professionals before making any health-related decisions or changes to your treatment plan. The information presented here is based on current research and expert opinions, which may evolve as new evidence emerges.
