Is GST responsible for the soaring Healthcare and Education Inflation?

India’s inflation story is strange

Yesterday CSO reported Consumer inflation at a paltry 2.2%. Food Inflation was (-2.5%), Education was 8.4% and Health was at a massive 9% (See Chart above).

In 2012, CSO determined that the average household spent about 10% on Health+Education and about 46% on Food. This difference comes because not every household spends money on Education every year (Households with members in the 4-25 age band mostly) and even fewer households spend money on healthcare every month (Households with very old or very young members mostly). But if one were to look the basket of just these families, education and healthcare can be a huge burden. Amongst poor households, Government sponsored health insurance programmes (at the central and state level) take care of many of their healthcare costs. The affluent are covered by health insurance plans. Some households are covered by neither. Either way, households are not fully insulated from healthcare inflation (owing either due to coverage issues or because Insurance providers pass on their costs to the consumers).

Amongst households with Private Insurance, costs are clearly rising. One reason is GST

Looking at Private Health Insurance Data. I have considered just 2 large medical insurers – Apollo Munich and Star Health

Q1 2018-19 vs 2017-18, Increase in Premium per policy – 20.5%

Q1 2017-18 vs 2016-17, Increase in Premium per policy – 8.5%

Increase in premiums occur due to a variety of reasons including targetting older consumers (who have to pay higher premiums) or selling multi-year policies which increase the value of the policy but when seen in conjunction with GST impact as well as the soaring health insurance inflation from November of 2017 onwards.

Healthcare Inflation is seeing another surge from October onwards due to the roll out of the Government healthcare plan – Ayushman Bharat. To be fair, not all of it can be attributed to the insurance plan as the Education sector appears to have seen an unusual surge in November and December.

In case of education, the poor quality of Government funded education, means that an increasing number of students are studying in private sector instituions. While it is natural of these institutions to increase prices every academic year. This year, the increases have been stupendous and in fact the peaks are now closer to UPA level peaks. Education Inflation which was steady until the end of the academic year in March has doubled in a span of 9 months.This too is likely to have been impacted by GST

There may be a host of factors that are influencing the sudden surge in healthcare and education inflation whether is GST, the new Government healthcare plan, changing strategies of Providers, Currenct fluctuations, State level interventions and so on. Either way, the inflation levels are now very high and sooner or later consumers will start complaining about these items. It is time perhaps for some action!