[Editorial Analysis] Insurance, false assurance

Mains Paper: 2 | Health

Prelims level: National Health Protection Scheme

Mains level: Issues relating to development and management of Social Sector/Services relating to Health, Education

Context

• The National Health Protection Scheme (NHPS) has received much media attention and political heft.

• It is expected that the scheme will reduce impoverishment caused by unexpected events that require lump sum amounts.

How NHPS can be improved?

• The NHPS is an improvement over the UPA’s Rashtriya Swasthya Bima Yojana (RSBY) in three ways:

• It does not require the renewal of the ID card every year, the ration or the Aadhaar card being adequate;

• Services can be accessed from any empaneled hospital in the country; and

• An increase in the sum assured from Rs 30,000 to Rs 5 lakh, per family per year.

Analysing on medical services

• The scepticism has to do with access to medical services. The scheme is founded on two assumptions.

• One, there is “excess capacity” to be addressed under the facility of “portability”. Such thinking has proved wrong by cases of emergencies in the supply deficit northern states while in the better-endowed southern states.

• The wait lists for elective surgeries are growing longer. Besides, indirect costs and constraints can be substantial deterrents.

• The NHPS, by creating an “effective market,” will incentivise private investment flow in Tier 2 and 3 cities.

• The critical barriers are acute shortage of human resources, huge operational costs and the low volume of paying patients to offset expenses.

Impacts on government budget

• The another reason for scepticism is budgets.

• Barring Kerala and Telangana, the rest of the well-endowed states are partnering with the NHPS, though they will continue their own schemes under which the same set of services are provided within the more modest limits of Rs 1 to 2 lakh per family, but benefitting 50 to 70 per cent more of the population.

• They will partner the NHPS only to avail of the 60 per cent amount incurred on the 30-50 per cent SECC beneficiaries. With such piggy backing, the NHPS may not require more than Rs 6,000-8,000 crore for a couple of years.

• Under the Aarogyasri scheme, Telangana has not reimbursed hospitals for a year.

• The non-synchronisation of financial releases of the Centre and states can lead to partial payments, forcing hospitals to bill patients.

• A study in Chhattisgarh showed that the private hospitals took reimbursement under RSBY as well as from the patients — a fraud that the IT architecture is unlikely to detect.

• Given the all pervasive scale of corruption, the large pool of illiterate patients, the information asymmetry, the fiscal stress and shifting priorities, the scheme could result in hospitals shortchanging the poor even more.

Cost of Care

• The scepticism has to do with the cost of care.

• The NHPS has begun with a low benchmark of prices, though in the face of stiff resistance from private hospitals.

• The government has promised a review after the general elections in 2019.

• Prices are likely to be substantially hiked necessitating a higher outlay. Besides, with increased utilisation, premiums are likely to increase in future years.

• The NHPS has increased the base premium amounts.

• The scheme’s sustainability will hinge on pricing a complex issue that requires engaging economists, cash accountants and actuaries who know how to measure risk.

• Fixing package rates by drawing averages of prices charged by the variety of providers and validated by some doctors, no matter how well meaning, is neither a rigorous nor a sustainable methodology.

• The stakes are high and setting prices in a market place requires the purchaser to have a near-perfect information of prices in order to bargain effectively.

• In other words, the relationship between hospitals and service providers and government is antagonistic, as it should be.

Impacts on economy

• Government-subsidised insurance schemes are closely-linked to the prevailing macroeconomic variables.

• In environments of low tax to GDP ratios or high fiscal deficits, budgets for health often get slashed.

• In such situations, any contractual obligation requiring timely payments could potentially imply a substitution effect with money being diverted from other heads such as the more desperately needed primary care and infectious disease-control programmes.

• This did happen in united Andhra Pradesh when the Rajiv Aarogyasri Scheme was announced.

• This is a concern necessitating building in firewalls to protect the immediate from the urgent.

Way forward

• The problem NHPS seeks to address will not go away by taking the path of least resistance giving a voucher and raising demand in a supply-deficit environment.

• The solution lies in bringing about structural shifts based on a well-thought through sequenced reform process.

• Optimising the functioning of the public facilities.

• Incentivising the small and mid-level hospitals .

• Strengthening primary healthcare to reduce hospitalisation.

• Such an evidence-based process would require.

• Budgetary hikes and enhancing capabilities.

• Learning from every country, rich, middle and low-middle income.

• That India can be an exception is being in denial of the costs that it will entail in future.

Share article