India has witnessed a significant price hike in the healthcare sector in the past few years. The situation worsened with the global health care crisis prevalent since the end of 2019. Due to this and other causes, medical inflation has overpowered the country.

Want to know about medical inflation in India? Read along!

There are several ways to define medical inflation. It can refer to a situation where there is an increase in average and unit cost of healthcare services over a period. Alternatively, it can refer to an increase in both unit cost and utilisation cost of services.

There are several driving factors of medical inflation in India. To understand this better, we have discussed utilisation and changes in unit cost. These are as follows -

Change in Cost Per Person

Change in cost per person points to the change in the unit cost of a particular ongoing medical treatment or procedure. This change primarily occurs due to the change in the following areas,

• Hospital consumable costs
• Hospital staff and consultant’s fees
• Other expenses, such as utilities, technology, rent or property costs

Change in Utilisation of Services Per Person

This points to the change in the entire utilisation of services. However, the utilisation may vary over time, i.e., it can move towards newer and costly treatments and drugs. This change can happen for the following reasons,

• Medical advancements such as the launching of new drugs and technologies that can treat the disease, which was earlier untreatable, can increase the ultimate cost. Additionally, new-age diagnostic technology that can detect diseases with more perfection can also cause medical inflation.
• Consumer behaviour is another driving factor for change in the utilisation of services per person. This refers to the shift in perspective among individuals, such as more healthcare benefits or increased health awareness to consumers.
• Change in access and availability of healthcare (such as supply and demand) can be attributed as one of the primary reasons for rising medical inflation.

Now that the analytical portion of the discussion of medical inflation is clear let’s focus on more generic factors of medical inflation.

• Growing and ageing population
• Increase in chronic diseases
• Higher health insurance premiums
• Reduced number of qualified experts in the medical field

As per the data published in The Hindu BusinessLine, the medical inflation rate in India in 2021 rose to over 8% in May.

The above discourse was about medical inflation in India. Understanding these factors is crucial to identify the change in medical costs over the past few years and to find ways to ensure optimum healthcare facilities at a minimal cost.