In the last 65 years since Independence India has failed to provide its people with Universal Health Coverage (UHC) of desirable quality. India remains one of the lowest spenders on healthcare globally, allocating around 5% of the GDP to healthcare, with the government spending at an abysmally low of around 1%.
However, there is now recognition of the nee d to address this issue and the government’s intent is to increase public expenditure to 2.5% of the GDP and create a roadmap for UHC. While most concur with the need for UHC and development of a healthcare system that provides easy access to all, at affordable price, with improved quality of outcome, there are differing views on the appropriate model to achieve these objectives, particularly for the poorest of our society.
In the initial decades after Independence, the government was the primary ‘provider’ — setting up and managing operations of hospitals, diagnostics, clinics and sub-centres across the country. Whether the ‘provider’ model has worked can be questioned. India’s health outcomes present a sorry picture — we lag behind the average for low and middle income countries (LMICs) in common measures like Infant Mortality Rate (IMR) and Maternal Mortality Ratio (MMR).
Apart from a few exceptions, poor quality and underutilisation of public healthcare facilities due to unavailability of doctors, technicians, etc. further compound the problem of meagre infrastructure. Even though public healthcare facilities are ‘free’ of charge, patients have to pay for medicines, tests, etc apart from having to make informal payments.
In recent times, the government has changed its approach and taken up the responsibility of ‘payor’ through state-funded social insurance schemes. The most well-known and well-regarded of these schemes is the Rashtriya Swasthya Bima Yojana (RSBY) scheme, which is the flagship scheme of the central government.
This scheme has achieved tremendous success in terms of coverage and has won international recognition for its design and architecture, including adoption of technology, paperless and automatic claims settlement processes, coverage of pre-existing diseases, competitive package rates for treatment, price discovery through bidding, customer choice, etc.
Going by global examples as well as the progress achieved in Indian schemes like the RSBY, it would be prudent on the government’s part to take up the mandate of ‘payor’ while encouraging private entities to handle the role of provisioning, with insurers playing the critical role of supporting the government in network management, cost control, claims management, technology, data and analytics, etc.
Without the insurers, government as a ‘payor’ would have to ‘buy’ the services of the providers directly — a model fraught with obvious risks. Even if the procurement process operated smoothly, the government would find it difficult to control leakage and misuse without the fraud control and analytics capabilities of the insurers, leading to cost inflation in the long term.
There are a number of other advantages of using the insurance model. First, the interest of the individual and the insurer is aligned — both want the individual to stay healthy and avoid hospitalisation. Preventive care can be effectively facilitated if the government provides insurance players with long-term insurance mandates. Second, like the government, it is in the interest of the insurer to reduce the cost of treatment.
Third, insurance mandates through competitive bidding process as is followed in RSBY allows price discovery and drives cost efficiencies while ensuring a cap on government’s financial outlay through risk transfer. Fourth, use of insurance gives flexibility to government to design different levels of financial support across economic strata of society and over time as families move up income brackets. Finally, insurance provides the individual choice without tying the person to a provider.
In Poor Economics, Banerjee and Duflo talk of the three I’s — Ideology, Ignorance and Inertia — that lead to poor policies. Let us not fall prey to any one of them as we redesign India’s healthcare delivery model. We have already witnessed encouraging results from alternative approaches.
The government should consider pursuing the ‘payor’ model using social insurance to provide affordable and quality healthcare for our people.
Bhargav Dasgupta is MD and CEO of ICICI Lombard. The views expressed by the author are personal.