Finally, a healthline for India’s poor: Business Line 6th February 2018

An insurance scheme that allows 50 crore people access to quality hospitals can work as a global model

Imagine a hutment dweller on the roadside in possession of an Aadhaar card. The child is down with very high fever or maybe the man has a cardiac arrest.

In panic, the wife does not beg for transport and rush the patient to the municipal hospital, where she would have to wade through officialdom to get the patient to share a bed in the ward —which has dirty sheets and houses a couple of street dogs.

This is the situation in many a government hospital. Instead, she rings for an ambulance and gets one from Lilavati, Apollo, or Max Hospital. The patient is taken into an air-conditioned room and the operation is performed.

Does this sound like fantasy?

A great model

This will be a reality because the National Health Protection Scheme has promised to cover 10 crore families involving 50 crore family members with health insurance cover of ₹5 lakh for secondary and tertiary hospitalisation.

Nothing can get better than this; the Indian model can serve as a global one where the government shows the way. Once it is successful, it can be replicated in developing countries.

The positive part of the programme is its coverage: 500 million poor family members, which approximates with a realistic picture of poverty in the country. Most academic exercises which show that the poverty ratio has come down are evidently off the track and hence never find acceptance.

With the Government speaking of 500 million, it means that around 38 per cent of the population is underprivileged and deserve not just medical cover but also a livelihood.

In fact, once this lot is identified, then other schemes can be linked to this sub-section of society.

Financing challenges

The Budget has made this positive announcement and added that resources will be provided for the same. At the financing level, this will require some innovative methods.

Scanning the websites of various general insurance companies, the quotations for covering a family of five persons where the oldest person is less than 30 years old for ₹5 lakh, yields an average of ₹11,000-13,000 per annum. Multiplying this by 10 crore families, the outlay would be Rs 1.1-1.3 lakh crore per annum.

The amount is a recurring one, and has to be paid every year by the government. In fact, the amount would increase, as with higher age groups the premium moves up commensurately.

Further, in this category of people covered, the incidence of disease is also higher, due to low access to superior medical facilities. Therefore, from the point of view of a medical insurance company, the payouts would be the highest for this category of insured.

A premium of ₹11000-13,000 per family would definitely be used up with higher claims for each and every family covered. Even though this means big business for the health insurance companies, it would not be profitable.

It is likely that the onus will fall on the public sector general insurance companies.

Their level of discomfort would increase, considering that there was also an announcement to merge and list the general insurance companies.

A way out is for the States to contribute a fixed proportion. However, this would be difficult as almost all States are facing a stiff fiscal position with limited funds for executing their capex projects. Therefore, funding will come fully from the Centre which if borrowed separately in the market under ceteris paribusconditions would mean a fiscal deficit of almost 20 per cent of the total i.e. 3.3 per cent to increase by 0.66 per cent on a recurring basis.

The government can subsidise the scheme and make the families pay a part of the premium.

But these families do not have the wherewithal to make such payments given their very low levels of income, which barely provides them with one full meal a day!

Coverage concerns

While funding is a major challenge, implementation too would be a logistics exercise. Enrolling such people is always difficult. Just like the farm insurance scheme which promises a lot but covers very few farmers, access to this grandiose scheme would be limited as most would be excluded.

Aadhaar and Direct Benefit Transfer are definitely structures created to ensure better delivery but they have to be made accessible to all deserving people.

There could be resistance from private hospitals. The insured poor would prefer to go these hospitals as they get better treatment from the best doctors.

But as they have no money, the government health-card should ensure there is cashless hospitalisation.

Hospitals normally do not encourage such transactions as there are delays in receipt of payments from when dealing with the insurance companies.

Given the magnitude, insurance companies would not make money on these policies when pooled. It would be impossible to settle claims leading to non-viability of the business.

Therefore, it is essential that loose ends (there are several of them) are sewn neatly before such a scheme is introduced.

Conceptually, the programme is compelling, but it would be hasty to rush into it, given the complexities involved. The limited success of farm insurance is a reminder of the implementation challenges.

A real chance

But if we can crack this one, then we should be able to extend this to education too where we dispense with government schools and open the doors of private schools to the poor, where the state finances quality education and the poor really stand a chance in life.

At present, their degree from an Indian language college or certificate from government school ensures that their disadvantage is maintained when competing with one with a convent-educated background.

This should change.