As preparations for the Union Budget 2026-27 gather pace, healthcare financing has re-entered the policy spotlight. Public health experts and industry stakeholders have urged the government to consider a tax-funded Universal Health Care (UHC) framework, alongside a significant strengthening of government hospitals and health infrastructure.
The demand reflects growing concern that incremental increases in health spending may be insufficient to meet India’s scale of need, particularly in the context of rising disease burden, population growth, and persistent gaps in access and quality.
Call for Tax-Funded Universal Health Care
Medical experts, including representatives of the Indian Medical Association, have advocated a move toward tax-funded UHC with a basic health package available to all citizens. The proposal includes:
- increasing public health expenditure to 2.5-5% of GDP, and
- strengthening government hospitals, medical staff capacity, and frontline health services.
From a fiscal perspective, this represents a shift away from reliance on fragmented insurance-based models toward direct budgetary provisioning, positioning healthcare as a core public good rather than a targeted welfare intervention.
Reforming PMJAY: Expanding the Coverage Envelope
Experts have also highlighted limitations in the current design of Ayushman Bharat PMJAY. While PMJAY has expanded inpatient coverage for vulnerable households, key gaps remain.
Suggested reforms include:
- inclusion of outpatient care, which accounts for a large share of out-of-pocket spending,
- more realistic package rates to reflect actual treatment costs,
- improved use of direct benefit transfers (DBT),
- defined co-payment structures, and
- timely reimbursement to hospitals.
The underlying argument is that without such reforms, PMJAY risks shifting financial stress from households to healthcare providers, particularly public hospitals.
GST Relief on Healthcare Inputs: A Tax Policy Angle
Another specific demand relates to indirect taxation. Experts have urged the government to:
- exempt lifesaving medical equipment, consumables, and vaccines from GST, or
- further rationalise GST to reduce the cost burden on public healthcare delivery.
From a tax-law standpoint, such exemptions would need to balance revenue considerations against the principle that healthcare inputs function as merit goods, where lower tax incidence can improve access and outcomes.
Evidence From Global and Domestic Research
Recent findings from the Lancet Commission reinforce the argument that public healthcare systems are central to achieving universal health coverage. Its analysis of India’s progress identifies several structural weaknesses:
- fragmented governance across Centre and States,
- poor coordination between primary, secondary, and tertiary care,
- services organised around institutions rather than patient journeys, and
- persistent gaps in quality, equity, and continuity of care.
The research underscores that policy intent alone is insufficient without institutional capacity and integrated service delivery.
Public Hospitals: Capacity Versus Caseload
Industry representatives, including members of the Medical Technology Association of India, have pointed out that despite increased budgetary allocations in recent years, public hospitals remain resource-constrained relative to patient load.
A key recommendation is a shift in public procurement policy:
- from selection based on lowest upfront price, to
- evaluation based on long-term value and outcomes for the healthcare system.
This approach is positioned as a safeguard against unsustainable healthcare cost escalation, observed in several advanced economies.
Budget 2026-27: What Is at Stake
The demands placed before Budget 2026-27 reflect a broader policy debate:
- whether healthcare should continue to be addressed through targeted schemes and incremental funding, or
- whether India should move decisively toward a tax-funded universal model, backed by robust public infrastructure.
Such a transition would have significant implications for:
- fiscal priorities,
- Centre-State coordination, and
- the design of tax and expenditure policy over the medium term.
Conclusion
The push for tax-funded universal health care signals a growing recognition that health outcomes are inseparable from public finance choices. While Budget 2026-27 may not deliver a full transition to UHC, it represents an opportunity to:
- recalibrate health spending priorities,
- strengthen public hospitals as the backbone of the system, and
- use tax policy strategically to lower systemic healthcare costs.
Ultimately, the success of any such reform will depend not only on higher allocations, but on institutional capacity, governance coherence, and execution discipline.
Source: NDTV