The Mystery Of India’s Higher Health Inflation! 

Studying and understanding economic data is typically a task best left to economists and their excel spreadsheets. But every now and then (and unfortunately it isn’t that rare in India) economic data throws up a mystery that is fit for sleuths.

Take, for instance, the consumer price inflation data released on Monday. Consumer price inflation was down. Food inflation was down. All explainable so far. But then you come to the category which reflects healthcare costs and see a sharp jump in health inflation, particularly in rural areas. This, at a time when rural demand conditions are considered to be soft.

Hmm, that doesn’t make sense, you think to yourself. And so you start a round of calls.

Round 1 of calls goes to the economists. After all they must understand the data better than economic journalists. Some economists have theories while others are as confused as the journalists. One theory is that the government’s recently launched health insurance scheme - Ayushman Bharat - may have pushed up healthcare costs. Another is that the weaker currency may have pushed up prices of medicines.

But these are all theories. Where is the proof, asks the editor. And so another round of calls begins. This time to the pharmaceutical analysts.

Question 1: Is It Medicines?

Health, classified under ‘Miscellaneous’ category along with other services, constitutes 5.89 percent of the total inflation index. Of this, medicines alone make up 4.01 percent. Other constituents include doctors’ fees, medical tests, hospital charges, other medical expenses, spectacles and family planning devices, in order of weightage.

Let’s start at the top. Has there been a sudden jump in medicine prices? Pharmaceutical analysts say no. Prices, even of those medicines that are not under price control, can go up only 10 percent in a year, explained a few analysts. Most added that they hadn’t noticed any recent increase in prices, which are typically hiked in April.

There were explanations ranging from the probable and the possible to the bizarre. The impact of a weaker currency on imports, lower imports from China and...the best of the lot....festive season demand. You roll your eyes, thank the analyst and put down the phone.

The theory of an increase in medicine prices does not check out. Apart from the lack of any anecdotal evidence, the wholesale price index data also does not support the theory of a rise in medicine prices. That index, unlike the retail index, has shown only a modest increase in inflation levels.

Question 2: Is It The Insurance Scheme?

Okay. So if its not medicines, then is it the impact of the insurance scheme?

Let’s pull in the insurance reporter and get her to make some calls too.

Ayushman Bharat or the national health protection mission, provides coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalisation. In the 97 days of its existence in 2018, the scheme claims to have 12,43,062 beneficiaries, over half of whom were hospitalised under the scheme in December alone.

The question is whether the availability of insurance is leading to higher spends on healthcare services? Is a moral hazard playing out? Or are more patients being referred for more expensive private treatments? In his research note, Soumyakanti Ghosh, chief economic advisor at State Bank of India, said that implementation of Ayushman Bharat Scheme might have led to an upgradation of health services at least in rural areas. But to what extent?

The calls made to those in the insurance industry left us none the wiser. And the data left us questioning whether a total spend of under Rs 1,000 crore can have such an impact on the inflation numbers.

Question 3: Is It Data Error?

With no clear explanations coming through so far (that’s not to say that there isn’t one), we ask if there is an error in the data?

Pravin Srivastava, the country’s chief statistician refers us to an official in the Statistical Office who deals with data. We call the official who says he has received similar queries from others, including some large brokerage houses. He intends to check the data and also send someone from his office to the market to cross-check the findings. Write a mail and we will get back but in about a week, says this official.

And so we wait. But we haven’t given up. We’ll make some more calls. Ask some more questions. We hope to get back to you with an answer. Soon. Maybe.

P.S.

In case you think this a unique situation, we would like to remind you of some other data mysteries. Like the rubber insulated cables, which caused large swings in industrial output in 2016. Or the surge in production of digestives which powered industrial output growth in 2017. As we said at the start - who said economic data analysis is only for the economists. Calling all private investigators.