Union Budget 2026: Healthcare industry makes the case for prevention over treatment

For over a decade, India's healthcare budgets have prioritised hospitals, beds, and subsidised treatments. From the National Health Mission in the early 2010s to Ayushman Bharat's 2018 launch, public spending has largely addressed illness after it occurs rather than preventing it.

This approach achieved scale. Ayushman Bharat created one of the world's largest public health insurance programs. Medical colleges multiplied. District hospitals expanded. Yet it also exposed a critical weakness: India remains treatment-dependent, with costs peaking late and preventive care chronically underfunded.

As Union Budget 2026 approaches, healthcare industry leaders argue the time has come to rebalance this equation.

What Budget 2025-26 delivered

Budget 2025-26, presented in February 2025, marked a substantial healthcare intervention. The government raised allocations by 11% to Rs 99,859 crore, expanded PM-JAY coverage to gig and platform workers, announced 200 new cancer daycare centers, committed to adding 75,000 medical seats over five years, reduced customs duties on life-saving drugs, and backed digital health infrastructure and medical tourism initiatives.

Despite these gains, health spending as a percentage of GDP remains modest by global standards at 1.94%. More critically, the bulk of incremental spending continues flowing to downstream care, hospitals, and tertiary treatment rather than early intervention.

This pattern is what healthcare investors, operators, and medtech founders now want Budget 2026 to disrupt.

The prevention imperative

"If the government has the fiscal bandwidth for only one major push this year, the focus must be squarely on preventive care and diagnostics," says Ajay Mahipal, Co-founder and General Partner at HealthKois.

India's disease burden has shifted decisively. Non-communicable diseases—cardiovascular illness, diabetes, hypertension, and cancer—now account for the majority of mortality and healthcare spending. Tertiary hospitals, Mahipal argues, enter the picture at the costliest stage.

Early detection of these conditions can dramatically reduce the national disease burden. Yet current incentives don't support it. Industry voices are calling for explicit benefits for routine screenings, particularly outside metro areas.

One proposal that is gaining traction is expanding tax benefits under Section 80D to include preventive diagnostics, coupled with performance-linked incentives for diagnostic labs willing to expand into Tier II and Tier III markets. Without such nudges, private capital concentrates in urban, high-margin segments.

The preventive-care push depends on how technology is deployed. India has seen an explosion of healthtech startups focused on patient acquisition, appointment booking, and wellness apps. But industry leaders argue that true efficiency gains lie deeper in the system.

"One must be very careful to distinguish between AI that is merely a marketing layer and AI that acts as a serious clinical tool," Mahipal cautions.

High-impact clinical AI is already showing results in automated tuberculosis imaging, oncology genomics, and hospital inventory optimisation. The next wave, he argues, will involve agentic AI, systems that actively assist clinical decision-making and reduce administrative burden through smarter revenue cycle management.

For this to scale nationally, sustained investment in health data infrastructure is essential. While the Ayushman Bharat Digital Mission has issued over 850 million ABHA IDs, adoption remains fragmented. Smaller hospitals and clinics often lack clear financial incentives to integrate.

The long-term prize is true interoperability, where patient data flows seamlessly across providers using FHIR standards, aligning patients, payers, and providers into a single ecosystem.

Affordability gaps in specialised care

Despite headline gains in insurance coverage, significant blind spots remain. Fertility care stands out. Treatments like IVF are largely excluded from insurance, leaving families exposed to high out-of-pocket costs.

"As someone who works closely with couples navigating fertility challenges every day, I see firsthand how emotionally and financially overwhelming the journey can be," says Neha Motwani, Founder and CEO of Luma Fertility.

With a single IVF cycle costing between Rs 1–3 lakh, most couples fund treatment themselves. Motwani argues that insurance inclusion could materially change access and outcomes, especially as infertility rates rise across urban India.

From an operator's standpoint, she also points to cost pressures from expensive imported medical equipment and inconsistent GST rates. "Tax rationalisation, along with targeted incentives and access to affordable capital, would help clinics lower costs and expand into Tier II and III cities."

Beyond affordability, Motwani highlights opportunities to support research and AI-driven diagnostics to improve consistency and outcomes in fertility care, areas where India remains underinvested despite growing demand.

Preventive care doesn't succeed on policy intent alone. It hinges on trust, adherence, and patient experience, especially in mass immunisation and chronic disease management.

Sarvesh Mutha, Managing Director at IntegriMedical, argues that drug-delivery systems are a missing link in India's preventive healthcare narrative.

"Patient experience directly affects trust and adherence," he says, noting that safe, comfortable, and efficient delivery of medicines and vaccines is essential for large-scale public health programs.

One of his key asks from Budget 2026 is public funding for clinical trials of novel drug-delivery technologies. Government-backed trials, he argues, can accelerate evidence generation, lower validation costs, and give healthcare providers confidence to adopt next-generation solutions, particularly in national immunisation and chronic care programmes.

The industry's pre-Budget message is less about spending more, and more about spending smarter. Over the past decade, India has built scale in healthcare delivery. Budget 2025-26 reinforced that foundation with higher allocations, broader coverage, and digital infrastructure.

Budget 2026, stakeholders argue, represents an inflection point, a chance to shift from treating illness to preventing it, from fragmented apps to interoperable systems, and from urban concentration to nationwide access.

If that transition is made, the payoff won't just be fiscal savings, but a healthcare system that delivers better outcomes at lower long-term cost.