Reform commission proposes health tax on luxury services, expatriate bond to fund healthcare

The Health Sector Reform Commission has proposed a new health tax targeting luxury and non-essential goods and services as part of a sweeping set of reforms aimed at making healthcare in Bangladesh more accessible, affordable, and financially sustainable.

The recommendation was part of a 37-point report submitted to Chief Adviser Muhammad Yunus yesterday. The report was presented at a press conference at the Bangladesh Foreign Service Academy by the commission's head, Prof Dr AK Azad, alongside other members.

Health tax on luxury goods, services

One of the key proposals in the report is the imposition of a VAT-based health tax on high-end establishments and non-essential products. These include air-conditioned restaurants, luxury hotels, upscale shopping malls, multiplex cinemas, amusement parks, expensive electronics, spas, and exclusive private clubs. 

The commission highlighted that this tax would not place a burden on low-income citizens and would instead create a reliable domestic revenue source to support Bangladesh's healthcare sector.

The tax revenue would be used to expand primary healthcare, subsidise essential medicines and diagnostics, fund social health insurance, and strengthen the public health system. The commission argued that this measure would help reduce out-of-pocket healthcare expenses and enhance financial protection for citizens.

Health Development Expatriate Bond

Another major recommendation involves launching a Health Development Expatriate Bond, aimed at encouraging Bangladeshi expatriates to invest directly in the country's healthcare system. 

The government-backed bond would offer competitive interest rates, tax benefits, and flexible foreign exchange options. Funds raised through this initiative would be allocated to modernise government hospitals, expand digital health solutions, improve emergency preparedness, and enhance primary healthcare services.

A global campaign targeting the Bangladeshi diaspora, using embassies, consulates, and digital platforms, is also proposed to engage expatriates and show how their contributions can directly benefit public health in Bangladesh.

Increased allocation for healthcare

The report calls for a significant increase in funding for the healthcare sector, recommending that at least 5% of GDP and around 15% of the national budget be dedicated to health. This would help improve healthcare coverage, reduce out-of-pocket costs for citizens, and provide financial protection. 

The commission also suggested raising excise taxes on products that harm health, including tobacco, sugary drinks, alcohol, and ultra-processed foods, in order to create sustainable funding for healthcare.

Emergency health fund, women's health priorities

The report stresses the importance of setting up an 'Emergency Health Fund,' which would be automatically activated in response to pandemics, outbreaks of infectious diseases, or any other public health emergencies. This fund would ensure that necessary resources can be quickly disbursed in times of crisis.

Additionally, the commission proposed prioritising women's health in national health financing. It recommends allocating at least 5% of the budget to life-cycle healthcare services for women, including maternal care, adolescent health, menstrual health management, and healthcare for older women.

A special 'Women's Health Fund' should be established to address these issues and reduce health disparities between men and women. Research shows that investing in women's healthcare yields significant economic benefits, as it reduces child mortality, improves family health behaviours, and boosts productivity.

Mandatory social health insurance, extended hospital hours

In another significant proposal, the commission recommended introducing mandatory Social Health Insurance, initially covering public and private sector employees as well as the poor. 

The insurance would provide financial protection for costly treatments such as cancer, kidney diseases, and complex surgeries, with premiums shared between employers and employees, and government subsidies for the poor.

To make healthcare more accessible, the commission also suggested extending service hours at government hospitals and health centres to 9am to 5pm, five days a week. Currently, government hospitals operate from 8am to 6pm, six days a week. 

The extended hours would apply to outpatient departments, pharmacies, and diagnostic labs, making it easier for working individuals to access care outside of regular office hours.

Regulating private healthcare, prescription audits

The commission has also recommended measures to regulate the private healthcare sector. Under the proposed reforms, the pricing of services offered by private hospitals and diagnostic centres would be regulated, ensuring proper supervision and quality control. 

A new legislation should be enacted to ensure patient protection, budget transparency, and accountability.

The commission also proposed the introduction of Prescription Audits at all public and private health centres to identify unnecessary medication overuse and improve service quality. 

Additionally, the average consultation time per patient should be limited to 10 minutes, and a weekly prescription review system could be implemented in the medium term.

Improving medicine accessibility

The report highlights the importance of improving access to essential medicines. It recommends removing VAT and duties on medicines for cancer, diabetes, hypertension, and antibiotics, while increasing VAT on luxury medicines and supplements. 

The commission also proposes that 25% of prescriptions for essential drugs be written using generic names, with a goal of reaching 100% within five years.

Furthermore, the commission suggests modernising the state-run Essential Drugs Company Limited (EDCL) and strengthening strategic procurement from the private sector to ensure the availability of quality medicines. 

It also recommends ensuring that 20% of the ultra-poor population receives free healthcare services, while 10% of poor patients should be able to access free care at private hospitals.

Ban on pharma promotional gifts

In a bid to curb unethical practices in the healthcare sector, the commission has recommended banning pharmaceutical companies from directly promoting their products to doctors. This includes prohibiting free samples or gifts from pharmaceutical companies to healthcare professionals.

Other key recommendations include legislating free access to primary healthcare for all citizens and establishing an independent health cadre to improve service delivery and administrative efficiency. 

The report also called for revising the list of essential medicines every two years and improving the availability of generic drugs in public healthcare settings.

The government formed the 12-member commission in November 2024.