Protect against rising medical costs

There are two areas the forthcoming Union Budget must focus on; the eligible medical allowance and the limits on medical insurance premium. Both are currently inadequate

Medical costs have gone up sharply in the last few years. While India may still be cheap by global standards, private healthcare is quite expensive in India. A routine medical check up at a reputed hospital can set you back by Rs.10,000/- A simple case of malaria can set you back by Rs.5,000/- if you add consultation fees, medical tests and medicines. Medically, Indians are still grossly underinsured. That needs to change.

The current exemption limit of Rs.15,000/- for annual medical allowance is out of sync with the times. For a family of 4 in a city like Mumbai, the basic expenditure on medicines, health checks and medical tests will be in the range of Rs.1-1.25 lakhs per annum. That is assuming that you do not have to be hospitalized, in which case the expenses can shoot through the roof. The medical allowance benefit should be right away enhanced to Rs.75,000/- per annum to reduce the burden on individuals. The second part that requires attention is the area of medical insurance.

Under Section 80D, premium paid on approved medical insurance is exempt up to Rs.15,000/- for self and family with an additional limit of Rs.15,000/- for parents (Rs.20,000 if they are senior citizens). These limits have quite a few anomalies. The limit of Rs.15,000/- is grossly inadequate for a family. For a premium of Rs.15,000/- a family of 4 can at best get a floater cover of Rs.500,000/-. Additionally, most senior citizens are not eligible for insurance cover or the premiums are too steep. Instead, the overall limit for medical insurance premium can be enhanced to Rs.50,000/- so that the insured has the flexibility to design the policy best possible way. An additional irritant needs to be removed. Currently, most insurance premiums are paid just before the end of the assessment year. Due to paucity of time such premiums are paid in cash. In most cases, the IT department considers cash payment of premiums as ineligible for tax benefit. That clause can be removed to encourage people to insure their health.

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