Financing COVID19 critical care

At the peak of the COVID19 crisis, India will need between 30,000 – 200,000 ICU beds. If these ICU beds are already available, the cost of treating people in critical care will range between Rs. 12,000 and Rs. 120,000 Crores, depending on the magnitude of the number of cases. 

In this blog, we outline the nature of these expenses and some ideas on how they might be minimized. 

  1. 55% (Rs. 6,600 – 66,000 Crores) of this spend will be on consumables, mainly PPE. The cost of PPE can be reduced but not by lowering specifications. 
  • Centralize the purchasing and supply of PPE
  • Get the specification of PPE correct. PPE provided by many vendors and even the government thus far, is of poor quality and may jeopardize the lives of healthcare workers. This will in turn only increase the cost of dealing with COVID19 not reduce it. 
  1. 27% of (Rs. 3,200 – 32,000 Crores) is to fund the salaries of doctors and hospital staff. 
  • Government policy often comes in the form of price caps. Price caps or salary caps will demoralize medical professionals. 
  • Institutional frameworks that incentivize doctors to take lower cash salaries are possible and work better. We propose one such framework, in the form of government bonds (below) – 
    • propose to hospitals to reduce the doctor and staff cash salary component of pay by say 50%
    • compensation 20% reduction by distribute tax credits equivalent to 20% of reduced salaries
    • award the remaining part of the salaries in the form of special government bonds payable in 2-3 years with a 5-7% coupon. These bonds would strictly be for distribution to the hospital staff
    • the value of bonds awarded to each hospital shall be linked to the value of the COVID spend 

We believe that with these measures the Government may be able to reduce / defer 40-60% of costs. Further, combined with the health insurance coverage by general and health insurers, of 10-20% of this spend, we believe that the Government can reduce the cost of care to Rs. 8,500

  1. Assumes total 1 lakh infected cases by June 2020
  2. Assumes total 10 lakh infected cases by June 2020

– Rs. 85,000. Further, the Government can defer a further Rs. 1,000 – 10,000 Crores worth of payments to later years by issuing bonds. 

Key assumptions

  1. We have modeled our analysis using the following two scenarios:
    1. 1 Lakh infected cases by June 
    2. 10 Lakh infected cases by June
  1. In each scenario, we have assumed that 10% of the people below 50 years of age and 50% of the people above 50 years of age will need ICU care
  1. Cost of non-ICU care will be negligible, because people will stay at home and exercise home isolation and take medicines
  1. Analysis of per case costs:

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