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Increasing penetration of Health Insurance: an important way to improve affordability and access to healthcare

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While India is making rapid strides in its economic growth, the country is increasingly facing constraints in providing healthcare benefits to a vast majority of its population. This is mainly because of the following reasons:1. Inadequate healthcare infrastructure and delivery system2. Lack of proper healthcare financing/insurance system for all strata of society

3. Difficulty in managing costs of healthcare even when the country is producing drugs for the world market

In this article I shall touch upon only on the healthcare financing/insurance part of the problem.

Sporadic initiatives:

We find some sporadic initiatives for population below the poverty line (BPL) with Rashtriya Swasthya Bima Yojana (RSBY) and other health insurance schemes through micro health insurance units, especially in rural India. It has been reported that currently around 40 such schemes are active in the country. Most of the existing micro health insurance units run their own independent insurance schemes.

Some initiatives by the State Governments:

Following initiatives are being taken by the state governments:

1. The Government of Andhra Pradesh is planning to offer health insurance cover under ‘Arogya Sri Health Insurance Scheme’ to 18 million families who are below the poverty line (BPL).

2. The Government of Karnataka has partnered with the private sector to provide low cost health insurance coverage to the farmers who previously had no access to insurance under “Yeshaswini Insurance scheme”. This scheme covers insurance cover towards major surgery, including pre-existing conditions.

3. Some other state governments have also started offering public health insurance facilities to the rural poor. In fact, some private health insurers like Reliance General Insurance and ICICI Lombard General Insurance were reported to have won some projects on health insurance from various state governments.

Cost of healthcare is rising but the penetration of health insurance is still very poor:

All over India costs of all types of healthcare be it primary, secondary or tertiary, are going beyond the reach of common man. Even in rural India penetration of such schemes is almost as poor as the organized health insurance schemes available in urban India. In a situation like this one will need to ponder why the penetration of health insurance and micro health insurance is so low in our country covering just around 35 to 40 million of the population.

Government spend on health is too low:

Even today the Government spends just 1.2% of GDP on health. When both public and private sectors expenditures are put together this number works out to not more than 5%.

It has been reported that in 2005-06 the total private expenditure towards healthcare was around Rs 1, 35,000 crore. This number is expected to grow at a 5-year CAGR of around 16%.

High ‘out of pocket’ expenditure towards healthcare:

Currently around 78% of healthcare expenditure is ‘out of pocket’ and without any health insurance cover. A recent survey of the National Survey Organization has reported that around 40% of the people who get admitted to hospitals for treatment go through extreme financial hardship and many a times are compelled to abandon the treatment or need to sell of their property to meet such unavoidable expenditure towards health.

Disease pattern undergoing a shift increasing healthcare expenditure:

As the disease pattern is undergoing a shift from acute to non-infectious chronic illness, the cost of treatment is becoming even more. In a situation like this there is an urgent need to have a robust healthcare financing system within the country.

Covering domiciliary treatment through health insurance is important:

Currently heath insurance schemes only cover expenses towards hospitalization. However, medical insurance schemes should also cover domiciliary treatment costs and loss of income along with hospitalization costs.

Government policy reforms towards health insurance are essential:

Currently Indian health insurance segment is growing at 50% and according to PHD Chamber of Commerce and Industry the segment is estimated to grow to US$ 5.75 billion by 2010. Even this number appears to be much less than adequate for a country like India.

It is high time that the Government creates a conducive environment for increased penetration of health insurance within the country through some innovative policy measures. One such measure could be to make it mandatory for all employers, who are required to provide provident fund facilities to their employees to also offer health insurance facilities to all of them.

It is a pity that the concept of health insurance has not taken off in our country, as yet, though has immense growth potential in the years to come. Innovative policy measures of the government towards this direction along with increasing the cap on Foreign Direct Investment (FDI) for health insurance will encourage many competent and successful global players to enter into this market. With the entry of efficient successful global players in health insurance segment, one can expect to see many innovative insurance products to satisfy the need of a large number of Indian population in the healthcare space. Such measures will also help increasing their retail distribution network with a wide geographic reach, significantly improving the affordability and access to healthcare of a large number of population of the country.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

An integrated approach towards Public Private Partnership (PPP) initiatives to improve access to healthcare in India is the way forward.

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Despite so much of stringent government control, debate and activism on the affordability of modern medicines in India, on the one hand, and the success of the government to make medicines available in the country at a price, which is cheaper than even Pakistan, Bangladesh and Sri Lanka, on the other, the fact still remains, about 65% of Indian population do not have access to affordable modern medicines, compared to 15% in China and 22% in Africa.The moot question therefore is, despite all these stringent price regulation measures by the government and prolonged public debates over nearly four decades or so to ensure better ‘affordability of medicines’, why then the situation on ‘access to modern medicines’has remained so abysmal to a vast majority of the population, in India?This, in my view, is mainly because; no single minister or ministry can now be held accountable by the civil society for such a dismal performance in the access to healthcare, in India.

Poor healthcare infrastructure:

As per the Government’s own estimate, India records:

1. A shortage of 4803 Primary Health Centres (PHC)

2. A shortage of 2653 Community Health Centres (CHC)

3. No large Public Hospitals in rural areas where over 70% of the populations live

4. Density of doctors in India is just 0.6 per 1000 population against 1.4 and 0.8 per 1000 population in China and Pakistan respectively, as reported by WHO.

The Government spending in India towards healthcare is just 1.1% of GDP, against 2% by China and 1.6% by Sri Lanka, as reported by the WHO.

Some good but sporadic public healthcare initiatives:

The government allocation of around US$ 2.3 billion for the National Rural Health Mission (NRHM), is a good initiative to bring about uniformity in quality of preventive and curative healthcare in rural areas across the country.
While hoping for the success of NRHM, inadequacy of the current rural healthcare infrastructure with about 80 percent of doctors, 75 percent dispensaries and 60 percent of hospitals located only in the urban India, may encourage skepticism.

Addressing the issue of improving access to healthcare:

While addressing the issue of improving access of healthcare, following three important ‘Public Private Partnership (PPP)’ initiatives would be most appropriate.

1. PPP to improve affordability:

To address this vexing problem, industry associations had jointly suggested a policy shift towards public-private-partnership (PPP) model to the government in 2006-07, instead of a stringent price control mechanism, which has not worked thus far to improve access of modern medicines, in India. Instead, the associations seemed to have suggested that the pharmaceutical industry will supply to the government the essential medicines at 50% of their Maximum Retail Price (MRP), to cater to the need of below the poverty line (BPL) families.

It is worth mentioning, many OPPI member companies like, Novartis, GSK, Pfizer, Sanofi-Aventis etc. have their own access to medicines programs in India.

Although the government did not respond to this proposal, to make it effective the ministry of health will require to quickly initiate significant ‘capacity building’ exercises, both in the primary and also in the secondary public healthcare facilities in the country. FICCI is reported to have suggested to the Government for an investment of around US$ 80 billion to create over 2 million hospital beds, for such capacity building exercises .

Frugal budget allocation by the government towards healthcare of the country, suggests that Government is gradually shifting its role in this very important area, primarily from healthcare provider to healthcare facilitator for the private sectors to develop it further. If it is so, it is imperative for the government to realize that the lack of even basic primary healthcare infrastructure, leave aside other incentives, impede effective penetration of private sectors into semi-urban and rural areas. Effective PPP model should be worked out to address such issues, without further delay.

2. PPP to leverage the strength of Information Technology (IT) to considerably neutralize the system weaknesses:

Excellence in ‘Information Technology’ (IT) is one of the well recognized strengths that India currently possesses. This strengths needs to be adequately leveraged through PPP to neutralize the above weaknesses. Harnessing IT strengths, especially in the areas of drug procurement and delivery processes, especially in remote places, could hone the healthcare delivery mechanism, immensely.

Another IT enabled technology that India can widely use across the nation to address rural healthcare issues is ‘‘Telemedicine’ for distant diagnosis and treatment of ailments. Required medicines for treatment could be made available to the patients through ‘Jan Aushadhi’ initiative of the Department of Pharmaceuticals (DoP), by utilising the Government controlled distribution outlets like, public distribution system (ration shops) and post offices, which are located even in far flung and remote villages of India.

3. PPP in healthcare financing for all:

Unlike many other countries, even as compared to China, over 72 percent of Indian population pay out of pocket to meet their healthcare expenses.

Out of a population of 1.3 billion in China, 250 million are covered by insurance; another 250 million are partially covered by insurance and balance 800 million are not covered by any insurance. Converse to this scenario, in India total number of population who may have some sort of healthcare financing coverage will be around 200 million with penetration of health insurance at just around 3.5% of the population. India is fast losing grounds to China mainly due to better response to healthcare infrastructure.

Even after leveraging IT for ‘Telemedicine’ and improving healthcare delivery processes, together with availability of low priced quality medicines from ‘Jan Aushadhi’ outlets, a robust healthcare financing model for all strata of society to make healthcare products/services affordable to a vast majority of the population, will remain an essential requirement for the country to address the issue of improving access to healthcare to all.

According to a survey done by National Sample Survey Organisation (NSSO), 40% of the people hospitalised in India borrow money or sell assets to cover their medical expenses. A large number of populations cannot afford to pay for the required treatment, at all.

Conclusion:

In my view an integrated approach for creating effective healthcare infrastructure throughout the country, leveraging IT in the entire healthcare space, appropriately structured ‘Health Insurance’ schemes for all strata of society ably supported by well spread out ‘Jan Aushadhi’ outlets even in far flung rural areas, deserve careful consideration by the Government.

A PPP model in all these three areas needs to be worked out in detail to address the pressing issue of improving ‘Access to Affordable Integrated Healthcare to ALL’.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.