SC Push to Fix Price Caps for Hospitals is a Bad Idea

The Supreme Court of India (SC) is entertaining a public interest litigation (PIL) asking for fixed rates for medical services in all hospitals in the country and has directed the Union Government to develop rates for each medical service. Otherwise, it proposed to fix rates charged under the Central Government Health Scheme as an interim measure. In this episode, Anupam Manur and Shrikrishna Upadhyaya break down the implications of the Supreme Court’s order to impose price caps for hospital services. They argue that this is, both legally and economically, an unsound measure and the SC should refrain from intervening to impose price caps, despite its good intentions. Price caps will inevitably create distortionary effects, leading to poorer quality and a shortage of healthcare in the country.