Description
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, optometry, dentistry, nursing, pharmacy, allied health, and other care providers. It refers to the work done in providing primary care, secondary care and tertiary care, as well as in public health.
Chapter Plan
Page No. Certificate Preface Acknowledgement Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 : : : : : Introduction to Study Objectives of the Study Research Methodology Introduction to healthcare financing Definition Characteristics Introduction to healthcare financing 22 3 5 7 9 14 16 19
History of healthcare financing Importance and rationale for the focus on health financing Role of TPAs : : : : Different mechanisms of financing Healthcare schemes in India Innovations in financing Healthcare financing in India Issues and challenges in healthcare financing Mental Health in India: Directions for Future Conclusion Annexure (References) 34 42 60 63 68 73 78 81
Chapter 10 : Chapter 11 : Chapter 12 : Chapter 13 :
Introduction
Over the last 50 years India has achieved a lot in terms of health improvement. But still India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in health indicators. In case of government funded health care system, the quality and access of services has always remained major concern. A very rapidly growing private health market has developed in India. This private sector bridges most of the gaps between what government offers and what people need. However, with proliferation of various health care technologies and general price rise, the cost of care has also become very expensive and unaffordable to large segment of population. The government and people have started exploring various health financing options to manage problems arising out of growing set of complexities of private sector growth, increasing cost of care and changing epidemiological pattern of diseases. The new economic policy and liberalization process followed by the Government of India since 1991 paved the way for privatization of insurance sector in the country. Health insurance, which remained highly underdeveloped and a less significant segment of the product portfolios of the nationalized insurance companies in India, is now poised for a fundamental change in its approach and management. The Insurance Regulatory and Development Authority (IRDA) Bill, recently passed in the Indian Parliament, is important beginning of changes having significant implications for the health sector. Efficient and effective healthcare is determined by the way the financing of healthcare systems is structured and organized. The health financing system in India is dependent on government budgetary allocations and private financing. The role of the latter has increased significantly in recent years. In the absence of effective regulation of private health services, healthcare costs are inevitably high, and it is people belonging to the lower income classes who suffer the most. In recent times, healthcare has become almost unaffordable and has given rise to serious equity issues.
Hence it is imperative that we find alternative health financing mechanisms. Health insurance is one such alternative. Health insurance protects people against catastrophic financial burden resulting from unexpected illness or injury. An efficient system ensures the pooling of resources to cover risks. Health insurance in India is at a nascent stage and contributes to a small proportion of the health expenditure. India is the most privatized health market in the world. Public support for healthcare has been historically low in India, averaging less than 1 per cent of the GDP, but what is worse is that in the last decade public health investment and expenditure has seen a secular declining trend. During the same period the private health sector grew rapidly, from being about 3 per cent of GDP in the beginning of 1990s to over 5 per cent today. In fact, the health sector has been growing at the rate of 1.4 times that of the GDP. This also means that the burden out-of-pocket on households is also increasing rapidly and more so for the poorer sections, especially since the public health expenditures are declining. What is worse is that the poor have to increasingly resort to taking debt or selling assets to meet costs of hospital care. It is estimated that 20 million people each year fall below the poverty line because of indebtedness due to healthcare. This is worrisome given the fact that more than two-thirds of the country’s population is already either poor or living at subsistence levels.
The health care system in India is characterized by multiple systems of medicine, mixed ownership patterns and different kinds of delivery structures. Public sector ownership is divided between central and state governments, municipal and Panchayat local governments. Public health facilities include teaching hospitals, secondary level hospitals, first-level referral hospitals (CHCs or rural hospitals), dispensaries; primary health centers (PHCs), sub-centers, and health posts. Also included are public facilities for selected occupational groups like organized work force (ESI), defense, government employees (CGHS), railways, post and telegraph and mines among others. The private sector (for profit and not for profit) is the dominant sector with 50 per cent of people seeking indoor care and around 60 to 70 per cent of those seeking ambulatory care (or outpatient care) from private health facilities. While India has made significant gains in terms of health indicators - demographic, infrastructural and epidemiological, it continues to grapple with newer challenges. Not only have communicable diseases persisted over time but some of them like malaria have also developed insecticide-
resistant vectors while others like tuberculosis are becoming increasingly drug resistant. HIV / AIDS have of late assumed extremely virulent proportions. The 1990s have also seen an increase in mortality on account of non-communicable diseases arising as a result of lifestyle changes. The country is now in the midst of a dual disease burden of communicable and non communicable diseases. This is coupled with spiraling health costs, high financial burden on the poor and erosion in their incomes. Around 24% of all people hospitalized in India in a single year fall below the poverty line due to hospitalization (World Bank, 2002). An analysis of financing of hospitalization shows that large proportion of people; especially those in the bottom four income quintiles borrow money or sell assets to pay for hospitalization (World Bank, 2002). This situation exists in a scenario where health care is financed through general tax revenue, community financing, out of pocket payment and social and private health insurance schemes. India spends about 4.9% of GDP on Regional Overview in South-East Asia health (WHR, 2002). The per capita total expenditure on health in India is US$ 23, of which the per capita Government expenditure on health is US$ 4. Hence, it is seen that the total health expenditure is around 5% of GDP, with breakdown of public expenditure (0.9%); private expenditure (4.0%). The private expenditure can be further classified as out-of-pocket (OOP) expenditure (3.6%) and employees/community financing (0.4%). It is thus evident that public health investment has been comparatively low. In fact as a percentage of GDP it has declined from 1.3% in 1990 to 0.9% as at present. Furthermore, the central budgetary allocation for health (as a percentage of the total Central budget) has been stagnant at 1.3% while in the states it has declined from 7.0% to 5.5%.
In light of the fiscal crisis facing the government at both central and state levels, in the form of shrinking public health budgets, escalating health care costs coupled with demand for health-care services, and lack of easy access of people from the lowincome group to quality health care, health insurance is emerging as an alternative mechanism for financing of health care.
OBJECTIVES OF STUDY
? To know the concept of healthcare financing. ? To discuss the role and importance of Third Party Insurance in the emerging health insurance market in India.
? To study the issues & challenges in healthcare financing in India. ? To produce certain suggestions and recommendations for the development of healthcare financing in India.
RESEARCH METHODOLOGY
“All progress for born of inquiry. Doubt is often better than over confidence for it leads to inquiry and inquiry leads to invention”.
For a good research and for proper and authentic results research methodology plays a crucial role. Research methodology is a way to systematically solve the research problem, which is a science of studying how research is done scientifically. Thus research methodology encompasses the research methods or techniques, the research results are capable of being evaluated either by the researcher himself or by others. The project also covers Descriptive Research which includes surveys and fact finding inquiries. 1. RESEARCH DESIGNDescriptive Research Design Descriptive Research Design describes the problem as it exists and tends to study each and every aspect of the problem. A research design is an arrangement of condition for collection and analysis of data in a manner that aims to combines relevance to research purpose with economy in procedure. In fact the research design is conceptual structure within which the research is conducted. Research design is needed because it facilitates the smooth sailing of the various research operations. There by making research as efficient as possible yielding maximum information with minimal expenditure of efforts, time and money. Research design, in fact, has a great bearing on the reliability of the results arrived at and as such constitutes the firm foundation of the entire evidence of the research work. In other words we can say that research design is advance planning of research. A good research design should be flexible, appropriate and efficient and so on. It should try to minimize biases and maximize reliability of the data collected and analyzed is considered as a good design. The design must give the smallest experimental error and it should yield maximum information. Objectives of the study Designing methods of data collection. Selecting of the sample. Collecting the data. Processing the data. Report the findings.
? ? ? ? ? ?
Descriptive Research Design Descriptive Research Design describes the problem as it exists and and every aspect of the problem. tends to study each
2. SCOPE OF STUDYAs this study narrows its focus on healthcare financing it takes a view and carries out a study on healthcare insurance, the role of TPAs & different mechanism of financing.
3. DATA COLLECTIONData collected for this study is of secondary nature with main sources of data constituting of articles in journals, newspapers and data downloaded from various websites as mentioned in annexure.
Introduction to Health Insurance Part~1
Definition of health care financing
Health insurance in a narrow sense would be ‘an individual or group purchasing health care coverage in advance by paying a fee called premium. In its broader sense, it would be any arrangement that helps to defer, delay, reduce or altogether avoid payment for health care incurred by individuals and house holds.
In other words health care financing
? mobilization of funds for health care ? allocation of funds to the regions and population groups and for specific types of health care ? mechanisms for paying health care
Features of Health Insurance and Indian Scenario
Reimbursement system: This system refers to the manner in which providers are paid. The characteristics of health insurance programmed can be described as follows
• In the traditional indemnity system, customers first incur expenditure on services and later submit claim to insurance company for reimbursement (such as, med claim insurance scheme). • Managed indemnity in which a third party administrator (TPA) takes care of the claim settlement of enrollees and directly reimburses service provider. • Insurer pays service provider a fixed amount, out of which provider will serve health needs of enrollees for a specific period. • Reimbursement can be fee-for-service, which would involve charging for each individual service, such as inpatient bed-days, drugs, investigations.
•
Case-specific reimbursement based on category of patient admitted. Under this system admissions are grouped into categories called diagnostic-related groups (DRGs), based on their clinical characteristics.
• The government’s fiscal effort measured as the proportion of total government expenditure spent on health again identifies India as a low performer. • In a global ranking of the shares of total public expenditure earmarked for health only 12 countries in the world had lower proportions spent on health.
• The out of pocket private spending dominates with 82 percent spending of all health spending from private sources. This is one of the highest in the world. • Globally only five countries have a higher dependence on private financing in the health sector (WHR 2000). • About 10 percent of Indians have some form of health insurance mostly formal sect or and government employees.
Introduction to Health Insurance Part~2
History of Healthcare Financing
The game is old but the rules are new, and in the process of changing further. From being ensconced in a monopoly run from the nationalization days beginning 1956, the insurance industry has indeed woken up — to a de-regulated environment, with the industry space now being populated by several private players in partnerships with multinational insurance giants. The opening of the insurance sector in India has been a landmark event in India’s economic history. Gone are the days of the domination by the LIC and GIC when ordinary citizens had to work according to their whims and fancies. Over the past one year, the traditional notion of insurance has been turned on its head. Today insurance offers complete solutions to create wealth, protect health and insure life. Added to this, the profile of the Indian customer is changing. Today, while boundaries between various financial products are getting blurred, people are increasingly looking not just at products but also at integrated financial solutions that can offer them stability of returns along with total protection. Insurance products will need to be customized to satisfy
these myriad needs of the customers and this where the private players come in bringing with them hopes of wider options and efficient service. The market is already seeing a rise in number of players and in making insurance products, new companies will have to adopt systems which factor in all potential risks. In such a scenario, it’ll be difficult to say what will be the differentiator across the different players — products, pricing or service? There is also the case of the neglected health insurance sector. Will there be more players venturing into this sector? The poor health scenario in India does offer a gamut of options for new players.
OPENING UP OF THE INSURANCE SECTOR When the insurance industry was nationalized, it was considered a landmark and a milestone on the way to the socialistic pattern of society that India had chosen after independence. However, with the passage of the Insurance Regulatory Development Act (IRDA) in 1999, things are quickly changing. The main features of the Act are: ??It requires the Indian promoter to invest either wholly in an insurance venture or team up with a foreign insurer, with a cap of 26% of equity for the foreign partner. ??The Indian promoter is permitted to divest only after 10 years to the Indian public, through a public offering of shares, at which time the equity structure will provide for equal participation between the Indian and foreign partner with a share of 26% each in the share capital. What the opening up of this sector actually does is open up a range of untapped opportunities for the new players, considering the potential market for buyers in the market is very high. It offers great scope for growth as the present insurance penetration is just 1.95% (ratio of insurance premium to gross domestic savings). (Source: knowledgedigest.com). For other countries, like Japan and South Korea the rate of penetration is greater than 10%. Countries like UK and France also have a penetration percentage closer to 10%.
Also what consumers need today are products that offer flexible options, with benefits unbundled and customizable to suit their diverse needs.
The Indian Insurance (Amendment) Bill 2001 came next, which had more changes in store: ??Cooperative societies are being recognized to carry on business. ??The training requirements are being modified as the existing norms are restrictive and putting constraints on the growth of corporate agency business in the country. ??A portion of the premium received from a customer can be paid as remuneration to an insurance intermediary, which has been defined to include insurance brokers and consultants. This doesn’t mean that public players are totally out of the market; in fact they continue to hold strong market share positions. Multinational insurers are keenly interested in emerging insurance because their home markets are saturated while emerging countries have low insurance penetrations and high growth rates.
Year 1912 1938 1956 1972 1999 2001
Important Happenings Insurance Act passed Insurance Act, 1938 Life Insurance industry nationalized General Insurance industry nationalized IRDA bill passed in Parliament to allow foreign players entry Insurance Amendment Bill 2001 passed by Parliament
From the above table we see that the first real attempt at insurance was carried out well before Independence, with the passing of the Insurance Act in 1912, which set down rules and regulations specific to the insurance industry. Then there was a more fundamental shakeup in 1938 with the Insurance Act, 1938 and this led to an insurance wing being set up, attached to the Ministry of Finance. At the time of nationalization of Life Insurance industry there were 176 (life and non-life) companies in the industry. The general insurance industry was nationalized in 1972. The next significant event was the passage of the Insurance Regulatory & Development Authority Act, which opened up the insurance sector to the private players. This was followed by the Indian Insurance (Amendment) Bill 2001 which dealt with the means by which insurers might access the new markets that had opened up and the role of brokers in the insurance market.
RATIONALE FOR FOCUS ON HEALTH CARE INSURANCE:
? Late 1970s Voluntary community based health insurance attracted considerable attention ? 1980’s financing of health care moved high on the agenda of the discussions on health policy ? Recurring theme in ? Executive Board Meeting of the WHO in 1986, ? World Health Assembly and the Commonwealth Health Ministers Conference in 1986 ? User charges dominating the policy debates of 1970s and 1990s ? Attention back on community based health insurance ? In developed countries the problem is containing the cost of health care In some developing countries the problem presents itself as how to maintain health spending and how to achieve “health for all” initiative.
WHY HEALTH INSURANCE (IMPORTANCE)
??Recognition
as an industry: In the mid 80's, the healthcare sector was recognized as an industry. Hence it became possible to get long term funding from the Financial Institutions. The Government also reduced the import duty on medical equipments and technology. ??Socio Economic changes: The rise of literacy rate, higher levels of income and increasing awareness through deep penetration of media channels, contributed to greater attention being paid to health. With the rise in the system of nuclear families, it became necessary for regular health check-ups and increase in health expenses. ??Brand Development: Many family-run business houses have set-up charity hospitals. By lending their name to the hospital, they develop a good image in the market, which further improves the brand image of products from their other businesses. ??Extension to related business: Some pharmaceutical companies like Wockhardt and Max India, have ventured into this sector as it is a direct extension to their line of business. TPAs IRDA defines TPA as “an insurance intermediary licensed by the Authority who, either directly or indirectly, solicits or effects coverage of, underwrite, collect, charge premium from an insured, or adjust or settle claims in connection with health insurance, except as an agent or broker or an insurer.”
THIRD PARTY ADMINISTRATORS (TPAS) TPAs are essentially insurance intermediaries, which undertake the entire administration of health plans for insurance companies. Apart from settling claims, TPAs also process business, offer customer service and technical support.
Private players have taken the lead and engaged TPAs to help them service policy holders who have taken health covers. • Iffco-Tokio, • Marine General Insurance, • ICICI Lombard General Insurance, • Reliance General Insurance and • Royal Sundaram General Insurance. They have already signed up their respective TPAs. The idea behind hiring TPAs is to reduce the high claim ratios by eliminating fraud cases. While TPAs' network with hospitals and interaction with doctors is expected to reduce claims substantially, insurers also wish to improve customer relationship through their TPAs. In a bid to give a shot in the arm to the health insurance sector, the Insurance Regulatory & Development Authority (IRDA) has allowed third party administrators (TPAs) in the health insurance sector to tie up with more than one insurer, but mandated a stringent code of conduct: ??IRDA (TPA-health services) Regulations 2001 has barred TPAs to advertise products without approval of insurance companies while envisaging strict confidentiality in information shared with insurers. ??A TPA also has to undergo a training of minimum three months in the field of Health insurance and have access to competent medical professionals to advise the insurance companies and the client on various matters. ??They would have to renew their licenses from IRDA every three years and inform the authority if there is any change in shareholder patterns involving more the 5 per cent equity. The Code of Conduct laid down by IRDA said that TPAs would have to bring to notice of insurers any adverse report or inconsistencies or any material fact that is relevant to the insurers business. ??It also says that TPAs would have to bring to notice of insurers any adverse report or inconsistencies or any material fact that is relevant to the insurers’ business. But the problem with TPAs is that the cost of these services have been factored into health plans of all the new players and they are 30 to 35% dearer than health plans of nationalized insurance companies. Anyway, at present TPAs do not allow individuals to avail of health insurance policies from them. The state general insurance companies
will deliberate on whether they can absorb the cost of hiring TPAs or else whether the cost of Med claims has to be revised upwards. They will also have to decide whether TPAs will service all policyholders or be limited to a certain clientele. There are strong reasons why some officials feel that appointing TPAs is not a commercially viable decision. For every Rs. 100 premium the insurance company collects, it spends Rs 141. Add to this the service charges payable to the TPA and the net outgo on the said premium would only increase. The problem gets compounded with IRDA’s ruling on TPA charges. IRDA has categorically stated that the service charge cannot be added to the premium. This m effectively means that TPA charges will have to be borne by the insurance company. The public insurance companies are caught in a catch-22 situation. They will not be able to increase the premium as the competition is intensifying and on the other hand it would be difficult to shoulder the burden of TPA charges over and above the existing problem of revenue deficit. This doesn’t mean though that there are no uses of TPAs. Since they analyze trends, they are able to keep a check on treatment pricing levels. A TPA with a good network can lower chances of fraud because of the steady business that it provides to the hospital. And the most important: the entry of TPAs would also mean cashless health care delivery to policyholders, along with trauma support and other advisory services. A cashless scheme under a TPA is a customized health insurance scheme generally devised as a Group Health insurance scheme and put in place by a Third Party Administrator (TPA). Here when the insured is hospitalized he/she need not pay for medical expenses incurred. Medical Expenses incurred are settled by the TPA directly with the concerned medical institution as per the terms and conditions of the health insurance package. Any amount that is not payable under the insurance scheme will be borne by the insured himself/herself and will have to be reimbursed by the TPA. This is quite unlike the med claim policy, which is basically a reimbursement scheme where the insured, when hospitalized, pays the medical institution, submits the claim to the insurance company and gets reimbursed as per the terms and conditions of the policy.
The Role of TPAs
Third party administrators (TPAs) are not technically managed care organizations but play an important role in health insurance markets. Neither insurance companies nor
care providers, they are intermediaries who bring together all components of healthcare, such as physicians, hospitals, clinics, long-term facilities, and pharmacies. • Their services include cashless service at hospitals, call centre support to policyholders, medical cost management, and management of claims and reimbursements. • They also provide services to the corporate sector in designing and managing health benefit packages for their employees. • Given the demand and supply-side complexities in health insurance and healthcare markets, TPAs provide an important link between insurance companies, healthcare providers and policyholders. • Intermediation by TPAs ensures that policyholders get hassle free services; insurance companies pay for efficient and cost effective services, and healthcare providers/policy holders get their reimbursements on time. • The core product or service of a TPA is ensuring cashless hospitalizations to policyholders. TPAs require skills to develop networks, manage finance, and delivery of appropriate healthcare services to its clients. • TPAs organize healthcare providers by establishing networks with hospitals, general practitioners, diagnostic centers, pharmacies, dental clinics, and physiotherapy clinics. They sign a memorandum of understanding with insurance companies according to which they inform policyholders about the network of healthcare delivery facilities and various systems and processes for settling claims. Policyholders are enrolled and registered with TPAs to avail of these services. In the event of hospitalization, health facilities are expected to inform the TPAs. The medical referee of the TPA examines the admissibility of the case and accordingly informs the healthcare facility to proceed with the treatment.
Revenue Generation
The major source of revenue for TPAs is the fees charged for providing various services. Insurance companies pay the fee according to the volume and scope of services provided by them and it usually a fixed percentage of the premium collected from the enrollees. However, TPAs may provide many other services to organizations for which the fee is paid by the organization directly. These services include: o Benefit management: TPAs help in designing appropriate health plans for the corporate sector and insurance companies. o Medical management: This is basically disease management and involves medical follow-up of the case. TPAs track the link. o Provider network management: This is the key task. TPAs need to negotiate with service providers regarding quality of care, credit facility, discounts, package pricing, priority appointments and admissions. Periodic review and evaluation of the performance of service providers is also vital.
o Claims administration: This involves the claim adjudication process. The tasks include documentation, checking eligibility and coverage, claim submission and arranging payment for the service provider. o Information and data management: TPAs can generate a lot of reports and database. These can be used as management tools for analysis and controlling cost and besides helping design new products.
Health service financing source
Health services financed broadly through private expenditure or public expenditure or external aid 1. Public expenditure includes all expenditure on health services by: a. Central and local government funds spent by state owned and parasitical enterprises as well as government and social insurance contributions. b. Where services are paid for by taxes, or compulsory health insurance contributions either by employers or insured persons or both this counts as public expenditure. 2. Voluntary payments by individuals or employers are private expenditure.
3. External sources refer to the external aid which comes through bilateral aid programmed or international non governmental organizations. 4. The ownership of the facilities used whether government by government, social insurance agencies, non profit organizations private companies or individuals is not relevant.
Mechanism of Health Care Financing
? ? ? ? ? General revenue or earmarked taxes social insurance contributions private insurance premiums community financing direct out of pocket payments
Each method ? distributes the financial burdens and benefits differently ? each method affects who will have access to health care ? financial protection
General revenue or earmarked taxes
? the most traditional way of financing health care ? finance a major portion of the health care (especially in low income countries)
The state collects its revenue from taxes. A portion of this is allocated for healthcare. Healthcare providers are paid from this allocation. Consumers get free service at point of delivery. However, they may have to pay a small nominal user fees.
Private insurance
? Private contract offered by an insurer to exchange a set of benefits for a payment of a specified premium. ? Marketed either by nonprofit or for profit insurance companies. ? Consumers voluntarily choose to purchase an insurance package that best matches their preference. ? Offered on individual and group basis. Under individual insurance the premium is based on that individuals risk characteristics. ? Major concern in private insurance is buyer’s adverse selection. ? Under group insurance, the premium is calculated on a group basis. Risk is pooled across age, gender and health status. Private or what is often also called “voluntary” insurance is a recent phenomena starting in an organized way some time in the mid-eighties through the public sector insurance companies. Prior to that these insurance companies did have group insurance schemes for their special clients (read big general insurance clients) but that covered an insignificant number of employees and their families. From mid ‘80s, the med claim scheme which is an individual hospitalization policy and does not cover comprehensive healthcare was started. In theory, the introduction of private health insurance can contribute to increasing the aggregate costs of health care in several different ways. Most of the arguments in favor of increasing health care costs due to private health insurance have to do with some disparity in the information available to parties involved in transactions in the health care and health insurance markets. A peculiar characteristic of private health services is that, unlike the public health sector, they provide almost entirely only curative care. Further, the private health sector is fully commoditized and totally unregulated with a complete absence of ethics in practice.
Community based financing
Refers to schemes based on three principles: community cooperation, local self reliance and pre payment
Factors for success of community financing
? Technical strength and institutional capacity of the local group ? Financial control as part of the broader strategy in local management and control of health care services ? Support received from outside organizations and individuals ? Links with other local organizations ? Diversity of funding ? Responding to other (non health) development needs of the community ? Ability to adapt to a changing environment Individuals, families or community groups make voluntary contributions towards meeting healthcare costs. The cost is shared among members regardless of individual use. This works out well for small groups. Community-based funds refer to schemes where members prepay a set amount each year for specified services. The premier are usually flat rate (not income-related) and therefore not progressive. Making profit is not the purpose of these funds, but rather improving access to services. Often there is a problem with adverse selection because of a large number of high-risk members, since premiums are not based on assessment of individual risk status. Exemptions may be adopted as a means of assisting the poor, but this will also have adverse effect on the ability of the insurance fund to meet the cost of benefits. Community-based schemes are typically targeted at poorer populations living in communities, in which they are involved in defining contribution level and collecting mechanisms, defining the content of the benefit package, and / or allocating the schemes, financial resources. Such schemes are generally run by trust hospitals or nongovernmental organizations (NGOs). The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Such schemes tend to be financed through patient collection, government grants and donations.
Social health insurance
Social insurance is an earmarked fund set up by government with explicit benefits in return for payment. It is usually compulsory for certain groups in the population and the premiums are determined by income (and hence ability to pay) rather than related to health risk. The benefit packages are standardized and contributions are earmarked for spending on health services. Social Health Insurance
This model introduces a fourth party in addition to the consumer, the provider and the state – the financing organization which mobilizes and manages the fund and pays the providers. Funds are obtained from mandatory income related contributions from all income earners and their employers and government subsidies from general taxation for those who have no income. The financing organizations are popularly known as plans. The major function of the state in this model is to enact and implement appropriate legislation to regulate the financing organization and the providers. Social health insurance is one of the options to increase financial resources for health through equitable and affordable contributions. Many experts also agree that social health insurance has a big potential to translate out-of-pocket payments to prepayment. In recent years, social health insurance, because of its potentials in contributing to universal coverage, financial protection, access and equity in financing and delivering health services, has gained more attention in this region. Social health insurance is included in policy level discussions in a number of countries as a potential alternative
source of financing that provides equitable access to needed health services regardless of the degree of health risks and the amount of contribution. This allows the insured members to pay health insurance premiums to the common pool according to their income, but use the necessary health services according to their needs.
Direct out of pocket
? Made by patients to private providers at the time a service is rendered. ? User fees refer to fees the patients have to pay to public hospitals, clinics, and health posts not to private sector providers. ? Proponents of user fees believe that the fee can increase revenue to improve the quality of public health services and expand coverage. ? Major objection raised against user fees had been on equity grounds. Out-of-pocket spending has three components:
• • •
Cost Sharing in Private Insurance Out of Pocket Expenses for Public Programs (flat fees paid each time an individual sees a doctor) Cost-Sharing in Public Programs (individual pays a percentage of bill for services or medication)
Each component has different implications and includes varying incentives and disincentives to the end-user. The type of Out-of-Pocket Expenditure (OPE) also plays a very important role in how individuals choose providers. For example, most patients tend to utilize those services that involve the least out-of-pocket expenditure. Typically, OPEs for hospital care are low; OPEs for ambulatory care are slightly higher; and OPEs for pharmaceuticals are the highest. As a result, there’s an implicit incentive for patients to use more hospital care than pharmaceuticals since hospital care receives a greater subsidy This is the traditional mechanism of financing health care
Services Provider
Consumer Payment
Doctors/Clinics/ Hospitals
But there are certain problems with this mechanism of financing • Out-of-pocket payments for health are the most inequitable among the class of resources that could be used to finance health services – other, more equitable, examples being, social insurance taxes, direct taxes, and the like. • Out-of-pocket spending on health does not take into account the losses owing to foregone income that result from poor health. If lost income were also to be included, the financial burden of health increases quite substantially for the lower quintiles. • The burden of out-of-pocket spending does not include the adverse effects on long-term health that might result from not seeking care in time. The poorest groups not only report fewer illnesses, but they obtain treatment for a smaller proportion of those reported, compared to the richest groups.
Insurance schemes in India categorized into : Mandatory, voluntary, employer based, and NGO based
Mandatory insurance ESIS and CGHS
The government-run schemes include the Central Government Health Scheme (CGHS) and the Employees State Insurance Scheme (ESIS).
Central Government Health Scheme (CGHS)
Since 1954, all employees of the Central Government (present and retired); some autonomous and semi-government organizations, MPs, judges, freedom fighters and journalists are covered under the Central Government Health Scheme (CGHS). This scheme was designed to replace the cumbersome and expensive system of reimbursements (GOI, 1994). It aims at providing comprehensive medical care to the Central Government employees and the benefits offered include all outpatient facilities, and preventive and primitive care in dispensaries. Inpatient facilities in government hospitals and approved private hospitals are also covered. This scheme is mainly funded through Central Government funds, with premiums ranging from Rs 15 to Rs 150 per month based on salary scales. The coverage of this scheme has grown substantially with provision for the nonallopathic systems of medicine as well as for allopathic. Beneficiaries at this moment are around 432 000, spread across 22 cities. The CGHS has been criticized from the point of view of quality and accessibility. Subscribers have complained of high out-ofpocket expenses due to slow reimbursement and incomplete coverage for private health care (as only 80% of cost is reimbursed if referral is made to private facility when such facilities are not available with the CGHS). Employee and State Insurance Scheme (ESIS) The enactment of the Employees State Insurance Act in 1948 led to formulation of the Employees State Insurance Scheme. This scheme provides protection to employees against loss of wages due to inability to work due to sickness, maternity, disability and death due to employment injury. It offers medical and cash benefits, preventive and primitive care and health education. Medical care is also provided to employees and their family members without fee for service. Originally, the ESIS scheme covered all power-using non-seasonal factories employing 10 or more people. Later, it was extended to cover employees working in all non-power using factories with 20 or more persons. While persons working in mines and plantations, or an organization offering health benefits as good as or better than ESIS, are specifically excluded. Service establishments like shops, hotels, restaurants, cinema houses, and road transport and news papers printing are now covered. The monthly wage limit for enrolment in the ESIS is Rs. 6 500, with a prepayment contribution in the form of a payroll tax of 1.75% by employees, 4.75% of employees' wages to be paid by the employers, and 12.5% of the total expenses are borne by the state governments. The number of beneficiaries is
over 33 million spread over 620 ESI centers across states. Under the ESIS, there were 125 hospitals, 42 annexes and 1 450 dispensaries with over 23 000 beds facilities. The scheme is managed and financed by the Employees State Insurance Corporation (a public undertaking) through the state governments, with total expenditure of Rs 3 300 million or Rs 400/- per capita insured person. The ESIS program has attracted considerable criticism. A report based on patient surveys conducted in Gujarat found that over half of those covered did not seek care from ESIS facilities. Unsatisfactory nature of ESIS services, low quality drugs, long waiting periods, impudent behavior of personnel, lack of interest or low interest on part of employees and low awareness of ESI procedures, were some of the reasons cited.
Other Government Initiatives
Apart from the government-run schemes, social security benefits for the disadvantaged groups can be availed of, under the provisions of the Maternity Benefit (Amendment) Act 1995, Workmen’s Compensation (Amendment) Act 1984, Plantation Labour Act 1951, Mine Mines Labour Welfare Fund Act 1946, Beedi Workers Welfare Fund Act 1976 and Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. The Government of India has also undertaken initiatives to address issues relating to access to public health systems especially for the vulnerable sections of the society. The National Health Policy 2002 acknowledges this and aims to evolve a policy structure, which reduces such inequities and allows the disadvantaged sections of the population a fairer access to public health services. Ensuring more equitable access to health services across the social and geographical expanse of the country is the main objective of the policy. It also seeks to increase the aggregate public health investment through increased contribution from the Central as well as state governments and encourages the setting up of private insurance instruments for increasing the scope of coverage of the secondary and tertiary sector under private health insurance packages. The government envisages an increase in health expenditure as a % of GDP from existing 0.9% to 2.0 % by 2010 and an increase in the share of central grants from the existing 15% to constitute at least 25% of total public health spending by 2010. The State government spending for health in turn would increase from 5.5% to 7% of the budget by 2005, to be further increased to 8% by 2010. The National Population Policy (NPP) 2000, envisages the establishment of a family welfare-linked health insurance plan. As per this plan, couples living below the poverty
line who undergo sterilization with not more than two living children would be eligible for insurance. Under this scheme, the couple along with their children would be covered for hospitalization not exceeding Rs 5 000 and a personal accident insurance cover for the spouse undergoing sterilization. The Institute of Health Systems (IHS ), Hyderabad has been entrusted the responsibility of operational zing the mandate of the NPP 2000. The initial scheme proposed by the HIS was discussed at a workshop in June 2003. The consensus at the meeting was that the scheme needed further improvement prior to its implementation even as a pilot project. In keeping with the recommendations of the Tenth Five Year Plan and the National Health Policy (NHP) 2002 , the Department of Family Welfare is also proposing to commission studies in eight states covering eight districts, to generate district-specific data, which is essential for conceptualization of a reasonable and financially viable insurance scheme. The current plan – the Tenth Five Year Plan (2002-07) - also focuses on exploring alternative systems of health care financing including health insurance so that essential, need-based and affordable health care is available to all. The urgent need to evolve, implement and evaluate an appropriate scheme for health financing for different income groups is acknowledged. In the past, the government has tried to ensure that the poor get access to private health facilities through subsidy in the form of duty exemptions and other such benefits. Social health insurance for families living below the poverty line has been suggested as a mechanism for reducing the adverse economic consequences of hospitalization and treatment for chronic ailments requiring expensive and continuous care. In the budget for the year 2002-2003, an insurance scheme called Janraskha was introduced, with the aim of providing protection to the needy population. With a premium of Re 1/- per day, it ensured indoor treatment up to Rs 3 000 per year at selected and designated hospitals and outpatient treatment up to Rs 2 000 per year at designated clinics, including civil hospitals, medical colleges, private trust hospitals and other NGO-run institutions. A few states have started implementing this scheme under pilot phase. In the budget for the period 2003-2004, another initiative of community-based health insurance has been announced. This scheme aims to enable easy access of less advantaged citizens to good health services, and to offer health protection to them. This policy covers people between the ages of three months to 65 years. Under this scheme, a premium equivalent to Re 1 per day (or Rs 365 per year) for an individual, Rs 1.50 per day for a family of five (or Rs 548 per year), and Rs 2 per day for a family of seven (or Rs 730 per year), would entitle them to get reimbursement of medical expenses up to Rs 30000 towards hospitalization, a cover for death due to accident for Rs 25000 and
compensation due to loss of earning at the rate of Rs 50 per day up to a maximum of 15 days. The government would contribute Rs 100 per year towards the annual premium, so as to ensure the affordability of the scheme to families living below the poverty line. The implementation of this scheme rests with the four public sectors insurance companies. The government also offers assistance by way of Illness Assistance Funds, which have been set up by the Ministry of Health and Family Welfare at the national level and in a few states. State Illness Assistance Funds exist in: Andhra Pradesh, Bihar, Goa, Gujarat, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mizoram, Rajasthan, Sikkim, Tamil Nadu, Tripura, West Bengal, NCT of Delhi and UT of Pondicherry. A National Illness Assistance Fund (NIAF) was set up in 1997, with the scheme being reviewed in January 1998. Through this, three Central Government hospitals and three nationallevel institutes have been sanctioned Rs 1000000 each at a time from the NIAF to provide immediate financial assistance to the extent of Rs 25000 per case to poor patients living below the poverty line and who are undergoing treatment in these hospitals / institutions. Thereafter the scheme has been extended to few other institutes across the country and provides Rs 25 000 – Rs 50 000 per case. Voluntary health insurance schemes • Are for individuals and corporations. • Available mainly through the General Insurance Corporation (GIC) of India and its four subsidiaries- a government owned monopoly. • Financed from household and corporate funds. Voluntary health insurance schemes or private-for-profit schemes In private insurance, buyers are willing to pay premium to an insurance company that pools people with similar risks and insures them for health expenses. The key distinction is that the premiums are set at a level, which provides a profit to third party and provider institutions. Premiums are based on an assessment of the risk status of
the consumer (or of the group of employees) and the level of benefits provided, rather than as a proportion of the consumer’s income. In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies (National Insurance Corporation, New India Assurance Company, Oriental Insurance Company and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide voluntary insurance schemes. The Life Insurance Corporation offers Ashadeep Plan II and Jeevan Asha Plan II. The General Insurance Corporation offers Personal Accident policy, Jan Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim policy, Cancer Insurance policy, Bhavishya Arogya policy and Dreaded Disease policy (Srivastava 1999 as quoted in Bhat R & Malvankar D, 2000) Of the various schemes offered, Mediclaim is the main product of the GIC. The Medical Insurance Scheme or Med claim was introduced in November 1986 and it covers individuals and groups with persons aged 5–80 yrs. Children (3 months – 5 yrs) are covered with their parents. This scheme provides for reimbursement of medical expenses (now offers cashless scheme) by an individual towards hospitalization and domiciliary hospitalization as per the sum insured. There are exclusions and preexisting disease clauses. Premiums are calculated based on age and the sum insured, which in turn varies from Rs 15 000 to Rs 5 00 000. In 1995/96 about half a million Med claim policies were issued with about 1.8 million beneficiaries (Krause Patrick 2000). The coverage for the year 2000-01 was around 7.2 million. Another scheme, namely the Jan Arogya Bima policy specifically targets the poor population groups. It also covers reimbursement of hospitalization costs up to Rs 5 000 annually for an individual premium of Rs 100 a year. The same exclusion mechanisms apply for this scheme as those under the Med claim policy. A family discount of 30% is granted, but there is no group discount or agent commission. However, like the Mediclaim, this policy too has had only limited success. The Jan Arogya Bima Scheme had only covered 400000 individuals by 1997. The year 1999 marked the beginning of a new era for health insurance in the Indian context. With the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance sector was opened to private and foreign participation, thereby paving the way for the entry of private health insurance companies. The Bill also facilitated the establishment of an authority to protect the interests of the insurance holders by regulating, promoting and ensuring orderly growth of the insurance industry. The bill allows foreign promoters to hold paid up capital of up to 26 percent in an Indian company and requires them to have a capital of Rs 100 crore alongwith a business plan
to begin its operations.Currently, a few companies such as Bajaj Alliance, ICICI, Royal Sundaram, and Cholamandalam among others are offering health insurance schemes. The nature of schemes offered by these companies is described briefly.
Bajaj Allianz:
Bajaj Alliance offers three health insurance schemes namely, Health Guard, Critical Illness Policy and Hospital Cash Daily Allowance Policy. - The Health Guard scheme is available to those aged 5 to 75 years (not allowing entry for those over 55 years of age), with the sum assured ranging from Rs 1000000 to 5000000 It offers cashless benefit and medical reimbursement for hospitalization expenses (pre and post-hospitalization) at various hospitals across India (subject to exclusions and conditions). In case the member opts for hospitals besides the empanelled ones, the expenses incurred by him are reimbursed within 14 working days from submission of all the documents. While pre-existing diseases are excluded at the time of taking the policy, they are covered from the 5th year onwards if the policy is continuously renewed for four years and the same has been declared while taking the policy for the first time. Other discounts and benefits like tax exemption, health checkup at end of four claims free year, etc. can be availed of by the insured. - The Critical Illness policy pays benefits in case the insured is diagnosed as suffering from any of the listed critical events and survives for minimum of 30 days from the date of diagnosis. The illnesses covered include: first heart attack; Coronary artery disease requiring surgery: stroke; cancer; kidney failure; major organ transplantation; multiple sclerosis; surgery on aorta; primary pulmonary arterial hypertension, and paralysis. While exclusion clauses apply, premium rates are competitive and high-sum insurance can be opted for by the insured. - The Hospital Cash Daily Allowance Policy provides cash benefit for each and every completed day of hospitalization, due to sickness or accident. The amount payable per day is dependant on the selected scheme. Dependant spouse and children (aged 3 months – 21years) can also be covered under the Policy. The benefits payable to the dependants are linked to that of insured. The Policy pays for a maximum single hospitalization period of 30 days and an overall hospitalization period of 30/60 completed days per policy period per person regardless of the number of confinements to hospital/nursing home per policy period.
ICICI Lombard:
ICICI Lombard offers Group Health Insurance Policy. This policy is available to those aged 5 – 80 years, (with children being covered with their parents) and is given to corporate bodies, institutions, and associations. The sum insured is minimum Rs 15 000/- and a maximum of Rs 500 000/-. The premium chargeable depends upon the age of the person and the sum insured selected. A slab wise group discount is admissible if the group size exceeds 100. The policy covers reimbursement of hospitalization expenses incurred for diseases contracted or injuries sustained in India. Medical expenses up to 30 days for Pre-hospitalization and up to 60 days for post-hospitalization are also admissible. Exclusion clauses apply. Moreover, favourable claims experience is recognized by discount and conversely, unfavourable aims experience attracts loading on renewal premium. On payment of additional premium, the policy can be extended to cover maternity enefits, pre-existing diseases, and reimbursement of cost of health check-up after four consecutive claims-free years.
Royal Sundaram Group:
The Shakthi Health Shield policy offered by the Royal Sundaram group can be availed by members of the women’s group, their spouses and dependent children. No age limits apply. The premium for adults aged up to 45 years is Rs 125 per year, for those aged more than 45 years is Rs 175 per year. Children are covered at Rs 65 per year. Under this policy, hospital benefits up to Rs 7 000 per annum can be availed, with a limit per claim of Rs 5 000. Other benefits include maternity benefit of Rs 3 000 subject to waiting period of nine months after first enrolment and for first two children only. ?
Cholamandalam General Insurance:
The benefits offered (in association with the Paramount Health Care, a re-insurer) in case of an illness or accident resulting in hospitalization, are cash-free hospitalization in more than 1 400 hospitals across India, reimbursement of the expenses during prehospitalization (60 days prior to hospitalization) and post- hospitalization (90 days after discharge) stages of treatment. Over 130 minor surgeries that require less than 24 hours hospitalization under day care procedure are also covered. Extra health covers like general health and eye examination, local ambulance service, hospital daily allowance, and 24 hours assistance can be availed of.
Employer-based schemes
Employers in both the public and private sector offers employer-based insurance schemes through their own employer-managed facilities by way of ump sum payments, reimbursement of employee’s health expenditure for outpatient care and hospitalization, fixed medical allowance, monthly or annual irrespective of actual expenses, or covering them under the group health insurance policy. The railways, defence and security forces, plantations sector and mining sector provide medical services and / or benefits to its own employees. The population coverage under these schemes is minimal, about 30-50 million people.
Insurance offered by NGOs / community-based health insurance
Community-based schemes are typically targeted at poorer populations living in communities, in which they are involved in defining contribution level and collecting mechanisms, defining the content of the benefit package, and / or allocating the schemes, financial resources. Such schemes are generally run by trust hospitals or nongovernmental organizations (NGOs). The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Such schemes tend to be financed through patient collection, government grants and donations. Increasingly in India, CBHI schemes are negotiating with the for profit insurers for the purchase of custom designed group insurance policies. However, the coverage of such schemes is low, covering about 30-50 million indicates that many community-based insurance schemes suffer from poor design and management, fail to include the poorest-of-the poor, have low membership and require extensive financial support. Other issues relate to sustainability and replication of such schemes.
Some examples of community-based health insurance schemes are discussed herein: • Self-Employed Women’s Association (SEWA), Gujarat : This scheme established in 1992, provides health, life and assets insurance to women working in the informal sector and their families. The enrolment in the year 2002 was 93 000. This scheme operates in collaboration with the National Insurance Company (NIC). Under SEWA’s most popular policy, a premium of Rs 85 per individual is paid by the woman for life, health and assets insurance. At an additional payment of Rs 55, her husband too can be covered. Rs 20 per member is then paid to the National Insurance Company (NIC) which provides coverage to a maximum of Rs 2000 per person per year for hospitalization. After being hospitalized at a hospital of one’s choice (public or private), the insurance claim is submitted to SEWA. The responsibility for enrolment of members, for processing and approving of claims rests with SEWA. NIC in turn receives premiums from SEWA annually and pays them a lumpsum on a monthly basis for all claims reimbursed. • Another CBHI scheme located in Gujarat, is that run by the Tribhuvandas Foundation (TF), Anand. This was established in 2001, with the membership being restricted to members of the AMUL Dairy Cooperatives. Since then, over 1 00 000 households have been enrolled under this scheme, with the TF functioning as a third party insurer. • The Mallur Milk Cooperative in Karnataka established a CBHI scheme in 1973. It covers 7 000 people in three villages and outpatient and inpatient health care are directly provided. • A similar scheme was established in 1972 at Sewagram, Wardha in Maharashtra. This scheme covers about 14 390 people in 12 villages and members are provided with outpatient and inpatient care directly by Sewagram. • The Action for Community Organization, Rehabilitation and
Development (ACCORD), Nilgiris, Tamil Nadu was established in 1991. Around 13 000 Adivasis (tribals) are covered under a group policy purchased from New India Assurance. • Another scheme located in Tamil Nadu is Kadamalai Kalanjia Vattara Sangam (KKVS), Madurai. This was established in 2000 and covers members of women’s self-help groups and their families. Its enrolment in 2002 was around 5 710, with the KKVS functioning as a third party insurer. • The Voluntary Health Services (VHS), Chennai, Tamil Nadu was established in 1963. It offers sliding premium with free care to the poorest. The benefits include discounted rates on both outpatient and inpatient care, with the VHS functioning as both insurer and health care provider. In 1995, its membership was 124 715. However, this scheme suffers from low levels of cost recovery due to problems of adverse selection. • Raigarh Ambikapur Health Association (RAHA), Chhatisgarh was established in 1972, and functions as a third party administrator. Its membership in the year 1993 was 72000.
Constraints on Health Insurance Contracts
Health insurance is complex and there are serious market failure problems. In any market-driven system, what should be produced, how it should be produced and for whom it should be produced are determined by market forces. Competitive environments take care that resources are used efficiently (at lowest cost) and effectively (with optimum outcomes). However, because of various demand and supplyside imperfections, there are inherent problems in health insurance markets. Important constraints on insurance contracts are – Moral hazard; – Adverse selection; – Covariate risks; and – Information problems.
Moral hazard:
A serious problem, it arises because policyholders would like to take decisions and actions which maximize their benefit and do not want to bear the full cost. The seminal works of Arrow (1963) and Pauly (1968, 1974), who proposed the moral hazard problem in medical care suggest that the policyholder does not consider the insurer’s costs. Unregulated healthcare markets and private insurance encourage this behavior since insurance lowers or avoids the cost of treatment at the point of treatment consumers tend to demand more (consumer moral hazard). Providers have an incentive to render more or unnecessary care than might be medically appropriate (provider induced moral hazard). To combat this problem, most insurance companies use mechanisms and conditionality which in the end only burdens policyholders with part of cost .Some of the mechanisms insurance companies have adopted are copayments or co-insurance, deductibles, or a reduced premium bonus for the future. Another possibility of coping with moral hazard is to arrange special contracts
Adverse selection:
The works of Akerlof (1970), Spence (1973), Stiglitz (1975), and Rothschild and Stiglitz (1976) have pioneered the concept of the adverse selection problem. Adverse selection arises when persons belonging to high-risk, groups seek coverage and the insurer cannot identify the risk. All policy holders are required to pay the same premium, whereas those belonging to higher-risk groups are likely to consume higher than the average quantity of services; they will also find the insurance policy more attractive, while those with good health will find insurance premium too high. Fewer and fewer, good cases will enroll in the insurance scheme and, as a result, the insurer finds having a pool of more risk cases. As Newberry and Stiglitz (1981) and Newberry (1989) have shown, insurance pools work best with easily identifiable risks.
Covariate risks:
The basic objective of any insurance mechanism is to protect individuals from risk. In most situations, the insurer helps in protecting policyholders from unique health risks, and it is expected that these risks are not related to others in the insurance pool. However, if covariate or collective risks – possible risks that would cause damage to many or even all members of the pool at the same time occur, there is nothing to be gained by cooperation The stronger the degree of positive covariance, the higher will be the cost, whereas negatively correlated risks will have the effect of reducing the total cost of risk-bearing High incidence and prevalence of communicable diseases in a community can give rise to high covariate risks. In a study of claims and reimbursements, about 22 per cent of the cases arose from communicable diseases In
India, 50 per cent of deaths take place because of communicable diseases. If all policyholders face similar risks, the risk cannot be reduced much through having insurance.
Information problem:
Availability of information would have a significant bearing on the development of insurance contracts. The severity of a moral hazard problem and adverse selection problems will depend on differences in the availability of information between insurer and policyholders. In order to address this problem, insurance companies need significant investments in infrastructure and development of systems .
Innovations in Health Care Financing
The healthcare industry in India has come a long way from the days when those who could afford it had to travel abroad to get highly specialized services such as cardiac surgery, while others had to do without it. Today, patients from neighboring countries in Asia are coming to India to receive specialized medical treatment. Not only is India meeting international standards, but at prices that compare very favorably with developed countries. The report takes a look at the healthcare industry in India; how it has evolved, the innovations that have taken place in the industry, the emerging trends and the opportunities for the future. Through a few significant players in the industry, the report examines the competencies that India has developed in healthcare. It explores how these healthcare providers are endeavoring to provide services to India's vast and widely spread population, through innovative methods.
In 2003, a CII and Mckinsey study projected that India's healthcare market could touch Rs.3,200 million by 2012 from the existing Rs.1,030 million. It also predicted that India
had a great future as a major destination for medical tourism. India is already a preferred healthcare destination for neighboring countries due to the low cost and high quality treatment available here. With the arrival of tele-medicine in 1999, several large healthcare facilities in India have been linked up with healthcare facilities in the neighboring countries and the rest of Asia. Tele-medicine has enabled international patients to obtain specialized care in from India. In the recent past, there have been several innovations in the healthcare services industry in India, giving patients a new experience of healthcare. The Amrita Institute of Medical Sciences' fully digital, computerized and networked facility enabled it to offer tele-medicine services such as tele-consultation, fetal tele-medicine and tele-surgery. Aravind Eye hospitals' Internet kiosks in remote rural areas enabled poor villagers to consult top eye physicians online. Apollo Hospitals covered the entire gamut of healthcare services, from primary, secondary and tertiary care to diagnostic services and pharmacies. The innovations in products and services have made its hospitals a one stop location for people's healthcare needs. The hub and spoke model was another innovation in the diagnostic centers and pathology laboratories segment. All these innovations have given patients better service. The innovations whether in business models, in marketing & promotion or in the use of technology, have created unique experiences for patients. Facilities such as Aravind Eye hospitals have impressed people worldwide, and have been the subject of study, with a view to replicating their success in other countries. India has become a major destination for quality healthcare for neighboring countries such as Pakistan, Nepal and Bangladesh.
Health care financing in India
THE INDIAN HEALTHCARE MARKET – UNLIMITED POTENTIAL With over 1 billion people and a healthy GDP growth India’s healthcare industry is on an upward trend. Healthcare has been given priority status by both the Central and individual state governments. Favorable policies and initiatives undertaken by the Government of India is expected to increase the number of new hospitals and improve medical facilities. Consequently this has increased the demand for capital equipment. Mumbai city alone has an estimated 52 Municipal hospitals, 14 Central and State Government owned hospitals, 32 trust hospitals (both Government and private) and 1091 private hospitals and around 5000 post-graduate doctors. The medical market can be regarded as a new motor of the Indian economy . Government health provisions: Number of Facilities PRIMARY CARE
PRIMARY HEALTH CENTERS PRIMARY HEALTH POSTS URBAN HEALTH POSTS
SECONDARY CARE TERTIARY CARE
DISTRICT AND TALUK HOSPITAL COMMUNITY HEALTH SECTOR CENTERS HOSPITAL AND HOSPITALS ESI AND PUBLIC MEDICAL COLLEGES
23,000 13,200
15,00 44,00
24,00
1,200
162
Source: McKinsey Analysis *
An area of note in India’ s healthcare sector is the opening up and privatization of the health insurance sector. This has a great impact on the medical device industry. Privatization of the insurance sector will have a positive impact on the device market. As the number of products and competitors increase in the market, consumers will start comparing and opt for the best. Insurance coverage will increase and enhanced services will prompt people to get sophisticated tests done more often. The entire device industry will benefit from these developments especially diagnostic imaging, clinical diagnostics, digital radiography and images integration, and intensive and critical care. The Indian healthcare industry is estimated at US $ 22 billion and the medical device market is estimated at US $ 1.85 billion and growing at 15% per annum. The conditions for exporting to India have become very conducive and 50%of the demand for medical equipment can be met only from imports out of which 70% of Electronic equipment is already imported. Estimated and Projected Medical Device Market Size in India
Source: Diagnostic Business Opportunities in India & McKinsey Analysis
Telemedicine services in India are growing very fast which again increases the demand for diagnostic medical equipment. Two other areas, which are growing rapidly, are Emergency medical services and clinical waste management. Medical tourism has witnessed a steady growth of 30% per annum.
Health care systems of India
India faces many common challenges stemming from rapid industrialization and integration into a global marketplace. Improving health system performance and the health status of their populations will remain major national goals in the years to come.
•
Equitable access to quality care: In India improving access to both
preventive and curative services is seen as a major priority by national health officials. India generally expends less on rural public health resources resulting in a lower level of immunization (67% of the population) and greater variability in basic sanitation infrastructure in
rural areas. there are now concerns that the standard of rural health care may actually be slipping as the share of health spending picked up by the central government has decreased by half over the last 20 years.
•
Affordability: This is a growing concern at a time when new medical treatments
and drugs, while effective, are becoming more expensive. Due to lack of health insurance coverage, the majority of health care expenses are still paid out-ofpocket by patients and their families at the time of care. Unaffordable health care has two serious consequences: 1) many patients are not getting beneficial services; and 2) when patients do get care, its costs create long-term personal financial hardships.
•
Sustainability: Sustainability of national health care programs will be an
ongoing goal for all emerging economies as access to and demands for more costly services increase. Currently, Mexico spends 5.6% of GDP on health care; India, 5.2%; and China, 2.7%.Ensuring system efficiency will be particularly important in the years to come as demographic trends put pressure on the financing of all public services, including health care. Partially as a consequence of growing affluence, the population of India is aging, implying greater future needs together with a shrinking tax base. As a result of its one-child policy, China may face the most serious problem. By 2040, there are expected to be only 2 working people for each person over 60 years old, compared to 6.4 in 2000.
Issues and challenges in Health Care Financing
Clearly major concerns exist in all three areas of health policy that have been highlighted earlier – in the overall costs of care, financial equity and the quality of care. A sustained improvement in these areas would play a significant role in advancing the primary goal of health policy – health, itself. The government could essentially adopt one of two methods to address these issues. The first option is to do nothing at all beyond what it has already done. This, unfortunately, does not imply an unchanged situation. • First, the Indian health sector would have to contend with the emergence of the private health insurance sector, given the passage of the Insurance Regulatory and Development Authority (IRDA) Bill. • Second, over the longer run, it would have to contend with an aging population and the increasing burden of expensive chronic illnesses, such as cancer, diabetes and heart disease, with substantial implications for the health budgets of the poor and of the government.11
Health sector and its financing: present scene and issues for the future
• During the last 50 years India has developed a large government health infrastructure with more than 150 medical colleges, 450 district hospitals, 3000 Community Health Centers, 20,000 Primary Health Care centers and 130,000 Sub-Health Centers. On top of this, there are large number of private and NGO health facilities and practitioners scatters though out the country. • Over the past 50 years India has made considerable progress in improving its health status. Death rate has reduced from 40 to 9 per thousand, infant mortality rate reduced from 161 to 71 per thousand live births and life expectancy increased from 31 to 63 years. • India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks. Insurance is limited to only a small proportion of people in the organized sector covering less than 10% of the total population. Currently there is no mechanism or infrastructure for collecting mandatory premium among the large informal sector. • Even in terms of the existing schemes, there is insufficient and inadequate information about the various schemes. Data gaps also prevail. Much of the focus of the existing schemes is on hospital expenses. There continues to be lack of awareness among people about health insurance. • In spite of existing regulation in some States, the private sector continues to operate in an almost unhindered manner. The growth of health insurance increases the need for licensing and regulating private health providers and developing specific criteria to decide upon appropriate services and fees. • Health insurance per se, suffers from problems like adverse selection, moral hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the absence of any costing mechanisms, there is difficulty in calculating the premium. There is also a need to evolve criteria to be used for deciding upon target groups, who would avail of the SHI scheme/s and also to address issues relating to whether indirect costs would be included in health insurance. Health insurance can improve access to good quality health care only if it is able to provide for health care institutions with adequate facilities and skilled personnel at affordable cost.
Given this scenario, the challenge, then, for Indian policy-makers is to find ways to improve upon the existing situation in the health sector and to make equitable, affordable and quality health care accessible to the population, especially the poor and the vulnerable sections of the society. It is in a way inevitable that the state reforms its public health delivery system and explores other social security options like health insurance. Implementing regulations would be one, but by no means the best mechanism to contain provider behavior and costs. This can only be done by developing mechanisms where government and households can together pool their funds. This could be one way of controlling provider behaviour. There is an urgent need to document global and Indian experiences in social health insurance. Different financing options would need to be developed for different target groups. The wide differentials in the demographic, epidemiological status and the delivery capacity of health systems are a serious constraint to a nationally mandated health insurance system. Given the heterogeneity of different regions in India and the regional specifications, one would need to undertake pilot projects to gather more information about the population to be targeted under an insurance scheme and develop options for different population groups. Health policy-makers and health systems research institutions, in collaboration with economic policy study institutes, need to gather information about the prevailing disease burden at various geographical regions; to develop standard treatment guidelines, to undertake costing of health services for evolving benefit packages to determine the premium to be levied and subsidies to be given; and to map health care facilities available and the institutional mechanisms which need to be in place, for implementing health insurance schemes. Skill building for the personnel involved, and capacity-building of all the stakeholders involved, would be a critical component for ensuring the success of any health insurance programme. The success of any health insurance scheme would depend on its design, the implementation and monitoring mechanisms which would be set in place and it would also call for restructuring and reforming the health system, and developing the necessary prerequisites to ensure its success. However, many challenges remain and these are: life expectancy 4 years below world average, high incidence of communicable diseases, increasing incidence of noncommunicable diseases, neglect of women's health, considerable regional variation and threat from environment degradation. It is estimated that at any given point of time 40 to 50 million people are on medication for major sickness in India. About 200 million workdays are lost annually due to sickness. Survey data indicate that about 60% people use private health providers for outpatient treatment while 60 % use government
providers for in-door treatment. The average expenditure for care is 2-5 times more in private sector than in public sector. India spends about 6% of GDP on health expenditure. Private health care expenditure is 75% or 4.25% of GDP and most of the rest (1.75%) is government funding. At present, the insurance coverage is negligible. Most of the public funding is for preventive, primitive and primary care programmed while private expenditure is largely for curative care. Over the period the private health care expenditure has grown at the rate of 12.84% per annum and for each one percent increase in per capital income the private health care expenditure has increased by 1.47%. Number of private doctors and private clinical facilities are also expanding exponentially. Indian health financing scene raises number of challenges, which are: • Increasing health care costs, • High financial burden on poor eroding their incomes, • Increasing burden of new diseases and health risks and • Neglect of preventive and primary care and public health functions due to under funding of the government health care. Given the above scenario exploring health-financing options becomes critical. Health Insurance is considered one of the financing mechanisms to over come some of the problems of our system.
MENTAL HEALTH: DIRECTIONS FOR FUTURE
All countries in the Region are facing a formidable challenge in expanding health insurance as an alternative mix, together with other mechanisms of health care financing. The situation is much more complex, especially in least-developed countries (LDC) of the Region, where most payments are made at the time when people seek allopathic or traditional health care, which is sometimes more than they can afford to pay. For the poor, who are unlikely to have any prepayment schemes and are frequently unable to benefit from tax-funded subsidized public health care, the out-of-
pocket payment (OOP) is the only mechanism for them to ensure adequate health care. It is thus difficult to have a sustainable, effective and equitable health care system facing a heavy burden due to the heavy OOP expenditure in the long run. The following are some of the possible health care financing policy options for national health policy-makers and planners to consider while formulating health policies and reforms.
Increasing Public Allocation
Almost all countries in the Region have low investment in health, with limited government revenue, especially due to the downturn in economic situation, increasing unemployment and high inflation Etc. While they have realized that health sector has to compete with all other sectors and the government budget is subject to political decision, the most obvious option of health financing for all governments still to be considered is to increase the level of resources in health financed through general revenue and also by increasing the level of public and quasi-public finance (social health insurance). There are many valid reasons for countries to increase the public investment in health care. Policy-makers need to review the differential allocation among sectors and adopt their fiscal policy in order to adjust the financial allocations so that the health sector can have a higher level of resources. According to the WHO-CMH, each 1% rise in income leads to a slightly more than 1% rise in health spending. The national income in countries of the Region is rising steadily over the years. While the annual economic growth might have been slowing down a while due to the Asian economic crisis of the late 1990s, most countries are recovering quickly. The annual growth of the health budget for public spending should be at par with, or even more than the overall annual economic growth. While a few countries are continuously facing internal civil strife and political unrest, many have experienced stable political situations. Even in countries experiencing conflict, peace initiatives are in progress. Once the socioeconomic burden of civil strife or political instability is under control, there could be increasing concentration on social development including health. There is also the possibility of increasing the allocation to health sector through foreign assistance in grants and loans. National policy-makers need to be aware of the drawbacks of such external inputs, imposing a greater share of in non-priority areas, limitation to pay health workers' remuneration, poor governance, and heavy investment in material capital rather than human and social capital.
Expansion of the SHI Coverage
SHI schemes in most countries are of different types and have varying degrees of coverage, and their development too is in different stages. Governments should further develop, expand and consolidate them. Most countries especially LDCs, would need financial inputs from external sources for expanding appropriate risk-pooling systems, especially those schemes designed to expand the membership among the poor. With improvement in employment conditions both in quantity and quality, SHI schemes have the highest potential to improve health care coverage. Social security and social health insurance schemes that are covering only regular income earners/employees could extend their coverage to their families/dependents, without additional investment. Those countries where community health insurance schemes are well established should also find ways and means to expand and consolidate them. There is potential for expansion in countries which are already experienced with community-based SHI schemes and other community-based financing programmes. Some form of subsidy, such as parliamentarians supporting prepayment for indigents, or some other forms of government subsidy for poor families and informal workers, could pave the way for enhancement of the expansion programmes. Those countries which have implemented the fee-for-services model should redirect their strategy to capitation, and global budget, etc.
Research into Policy and Practice
The policy stakeholders, including parliamentarians and the ministries of health, require vision, understanding and influence. Without a good understanding of what is happening in financing health care, it will not be possible for these stakeholders to develop appropriate policies and strategies to successfully implement the appropriate mix of health care financing options. Periodic summary reports showing geographical and temporal variations of the socioeconomic and health status have to be prepared. Information on the distribution and impact of public sector health inputs and of budgetary allocations could reveal crucial variations. For policy analysts and health planners, a detailed analysis of stakeholders, including political mapping is required to indicate as to whom the results of policy analysis should be addressed to. Regular updating of National Health Accounts (NHA) will provide necessary guidance for policy options and useful insights into the finances of the health sector. It would also provide appropriate interpretation and analysis to decision-makers and planners to review how they can and should allocate public resources for health, what should be
the level of public and private expenditure, and how private resources can be mobilized for public health expenditure, etc. Practical difficulties might arise in updating NHA in many countries, such as difficulty in getting the total expenditure of private sector health care institutions; estimating community financing (donations/trust funds); estimating external donor inputs in the health sector, especially when these donor agencies work directly with NGOs and communities and the need for capacity-building for national NHA teams. Health care financing is one of the key functional areas for improving health system performance. Appropriate stewardship or governance of health systems is required to achieve better health financing reform. Each country needs to review how these organizational and institutional arrangements on health financing can be improved, in order to increase as well as reallocate financial resources for health care while, at the same time, not having to overburden the poor.
Development of Social Capital
Gathering, sharing, analyzing and reporting information on health systems development could be done by agencies within and outside the ministries of health. In addition to the health planning and policy units, bureaus and departments usually established under the direct responsibility of the ministries of health, there are enough institutions and individual expertise, both in public and private institutions like national research institutes, institutes for policy studies, academic departments of universities, semi government and nongovernmental organizations, local and international research and development institutions, which could be exploited for the national cause. Many of such institutions are parasitical, not-for-profit institutions and they could be effectively utilized to gather and share intelligence and expertise. These institutions could be set up at some distance, but they should not be too dissociated, too academic and irrelevant. The ministries of health could still play a role on appropriate contract-setting, and in facilitating and overseeing the work of these institutions.
Conclusion
In conclusion, it is critical to recognize that in recommending any policies for financing the health system, no country starts from a blank slate. The appropriateness of particular strategies in any particular country will depend on its specific history, institutions, culture, politics and economic resources. The development of various types of mix of health care financing mechanisms could be judged by how well they are likely to achieve the goals of equity, better health and responsiveness, and fair financing. There is a need to have a higher level of fairly distributed prepayment schemes with appropriate strategic purchasing. The existing systems of taxation, social security institutions, and the organization of health care service providers and insurers have been developed out of historical processes and conditioned by experiences of nation-building, colonialism, labor movements, wars, communal and kinship patterns, and technological changes. Out of this, citizens have already developed their beliefs and expectations, with regard to payment mechanism. As with all social arrangements, there are ways and means to undertake reforms, but it requires inputs from social institutions and support from all stakeholders. The out-ofpocket payment, which is the major mode of financing in most countries of the Region, tends to be quite regressive and often impedes access to health care. The challenge in revenue collection is how to expand pooling mechanisms through general tax revenue and/or social health insurance contributions. The experience on implementing nation-wide mandatory health insurance schemes in low- and middle-income countries could be shared and appropriate adaptations could be made in accordance with the respective socioeconomic conditions of countries. The existing social health insurance schemes mainly covering the formal employed sector could be reviewed thoroughly and appropriate organizational and institutional reforms could be introduced in order to improve their efficiency and effectiveness. At the same time, their coverage could also be increased. Many other forms of risk-pooling schemes such as community-based or populationbased trust funds and foundations could be introduced so that the financial and health risks of the poor are adequately protected.
REFERENCES
Articles: -
• • • •
“.Health Insurance in India Opportunities, Challenges and Concerns” by Dileep Mavalankar, Ramesh Bhat IRDA Journal (2003): ‘Data for Health Insurance’, March “Operationalising Right to Healthcare in India” by Ravi Duggal Health insurance and Third Party Administration” by RAMESH BHAT, SUMESH K BABU ,Economic and Political Weekly July 10, 2004
Websites: ? WWW.cehat.Com ? WWW.HMO.Com ? WWW.IRDA.Com ? WWW.GENINS INDIA.Com ? WWW.TTK HEALTHCARE SERVICES.Com
doc_169837942.doc
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, optometry, dentistry, nursing, pharmacy, allied health, and other care providers. It refers to the work done in providing primary care, secondary care and tertiary care, as well as in public health.
Chapter Plan
Page No. Certificate Preface Acknowledgement Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 : : : : : Introduction to Study Objectives of the Study Research Methodology Introduction to healthcare financing Definition Characteristics Introduction to healthcare financing 22 3 5 7 9 14 16 19
History of healthcare financing Importance and rationale for the focus on health financing Role of TPAs : : : : Different mechanisms of financing Healthcare schemes in India Innovations in financing Healthcare financing in India Issues and challenges in healthcare financing Mental Health in India: Directions for Future Conclusion Annexure (References) 34 42 60 63 68 73 78 81
Chapter 10 : Chapter 11 : Chapter 12 : Chapter 13 :
Introduction
Over the last 50 years India has achieved a lot in terms of health improvement. But still India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in health indicators. In case of government funded health care system, the quality and access of services has always remained major concern. A very rapidly growing private health market has developed in India. This private sector bridges most of the gaps between what government offers and what people need. However, with proliferation of various health care technologies and general price rise, the cost of care has also become very expensive and unaffordable to large segment of population. The government and people have started exploring various health financing options to manage problems arising out of growing set of complexities of private sector growth, increasing cost of care and changing epidemiological pattern of diseases. The new economic policy and liberalization process followed by the Government of India since 1991 paved the way for privatization of insurance sector in the country. Health insurance, which remained highly underdeveloped and a less significant segment of the product portfolios of the nationalized insurance companies in India, is now poised for a fundamental change in its approach and management. The Insurance Regulatory and Development Authority (IRDA) Bill, recently passed in the Indian Parliament, is important beginning of changes having significant implications for the health sector. Efficient and effective healthcare is determined by the way the financing of healthcare systems is structured and organized. The health financing system in India is dependent on government budgetary allocations and private financing. The role of the latter has increased significantly in recent years. In the absence of effective regulation of private health services, healthcare costs are inevitably high, and it is people belonging to the lower income classes who suffer the most. In recent times, healthcare has become almost unaffordable and has given rise to serious equity issues.
Hence it is imperative that we find alternative health financing mechanisms. Health insurance is one such alternative. Health insurance protects people against catastrophic financial burden resulting from unexpected illness or injury. An efficient system ensures the pooling of resources to cover risks. Health insurance in India is at a nascent stage and contributes to a small proportion of the health expenditure. India is the most privatized health market in the world. Public support for healthcare has been historically low in India, averaging less than 1 per cent of the GDP, but what is worse is that in the last decade public health investment and expenditure has seen a secular declining trend. During the same period the private health sector grew rapidly, from being about 3 per cent of GDP in the beginning of 1990s to over 5 per cent today. In fact, the health sector has been growing at the rate of 1.4 times that of the GDP. This also means that the burden out-of-pocket on households is also increasing rapidly and more so for the poorer sections, especially since the public health expenditures are declining. What is worse is that the poor have to increasingly resort to taking debt or selling assets to meet costs of hospital care. It is estimated that 20 million people each year fall below the poverty line because of indebtedness due to healthcare. This is worrisome given the fact that more than two-thirds of the country’s population is already either poor or living at subsistence levels.
The health care system in India is characterized by multiple systems of medicine, mixed ownership patterns and different kinds of delivery structures. Public sector ownership is divided between central and state governments, municipal and Panchayat local governments. Public health facilities include teaching hospitals, secondary level hospitals, first-level referral hospitals (CHCs or rural hospitals), dispensaries; primary health centers (PHCs), sub-centers, and health posts. Also included are public facilities for selected occupational groups like organized work force (ESI), defense, government employees (CGHS), railways, post and telegraph and mines among others. The private sector (for profit and not for profit) is the dominant sector with 50 per cent of people seeking indoor care and around 60 to 70 per cent of those seeking ambulatory care (or outpatient care) from private health facilities. While India has made significant gains in terms of health indicators - demographic, infrastructural and epidemiological, it continues to grapple with newer challenges. Not only have communicable diseases persisted over time but some of them like malaria have also developed insecticide-
resistant vectors while others like tuberculosis are becoming increasingly drug resistant. HIV / AIDS have of late assumed extremely virulent proportions. The 1990s have also seen an increase in mortality on account of non-communicable diseases arising as a result of lifestyle changes. The country is now in the midst of a dual disease burden of communicable and non communicable diseases. This is coupled with spiraling health costs, high financial burden on the poor and erosion in their incomes. Around 24% of all people hospitalized in India in a single year fall below the poverty line due to hospitalization (World Bank, 2002). An analysis of financing of hospitalization shows that large proportion of people; especially those in the bottom four income quintiles borrow money or sell assets to pay for hospitalization (World Bank, 2002). This situation exists in a scenario where health care is financed through general tax revenue, community financing, out of pocket payment and social and private health insurance schemes. India spends about 4.9% of GDP on Regional Overview in South-East Asia health (WHR, 2002). The per capita total expenditure on health in India is US$ 23, of which the per capita Government expenditure on health is US$ 4. Hence, it is seen that the total health expenditure is around 5% of GDP, with breakdown of public expenditure (0.9%); private expenditure (4.0%). The private expenditure can be further classified as out-of-pocket (OOP) expenditure (3.6%) and employees/community financing (0.4%). It is thus evident that public health investment has been comparatively low. In fact as a percentage of GDP it has declined from 1.3% in 1990 to 0.9% as at present. Furthermore, the central budgetary allocation for health (as a percentage of the total Central budget) has been stagnant at 1.3% while in the states it has declined from 7.0% to 5.5%.
In light of the fiscal crisis facing the government at both central and state levels, in the form of shrinking public health budgets, escalating health care costs coupled with demand for health-care services, and lack of easy access of people from the lowincome group to quality health care, health insurance is emerging as an alternative mechanism for financing of health care.
OBJECTIVES OF STUDY
? To know the concept of healthcare financing. ? To discuss the role and importance of Third Party Insurance in the emerging health insurance market in India.
? To study the issues & challenges in healthcare financing in India. ? To produce certain suggestions and recommendations for the development of healthcare financing in India.
RESEARCH METHODOLOGY
“All progress for born of inquiry. Doubt is often better than over confidence for it leads to inquiry and inquiry leads to invention”.
For a good research and for proper and authentic results research methodology plays a crucial role. Research methodology is a way to systematically solve the research problem, which is a science of studying how research is done scientifically. Thus research methodology encompasses the research methods or techniques, the research results are capable of being evaluated either by the researcher himself or by others. The project also covers Descriptive Research which includes surveys and fact finding inquiries. 1. RESEARCH DESIGNDescriptive Research Design Descriptive Research Design describes the problem as it exists and tends to study each and every aspect of the problem. A research design is an arrangement of condition for collection and analysis of data in a manner that aims to combines relevance to research purpose with economy in procedure. In fact the research design is conceptual structure within which the research is conducted. Research design is needed because it facilitates the smooth sailing of the various research operations. There by making research as efficient as possible yielding maximum information with minimal expenditure of efforts, time and money. Research design, in fact, has a great bearing on the reliability of the results arrived at and as such constitutes the firm foundation of the entire evidence of the research work. In other words we can say that research design is advance planning of research. A good research design should be flexible, appropriate and efficient and so on. It should try to minimize biases and maximize reliability of the data collected and analyzed is considered as a good design. The design must give the smallest experimental error and it should yield maximum information. Objectives of the study Designing methods of data collection. Selecting of the sample. Collecting the data. Processing the data. Report the findings.
? ? ? ? ? ?
Descriptive Research Design Descriptive Research Design describes the problem as it exists and and every aspect of the problem. tends to study each
2. SCOPE OF STUDYAs this study narrows its focus on healthcare financing it takes a view and carries out a study on healthcare insurance, the role of TPAs & different mechanism of financing.
3. DATA COLLECTIONData collected for this study is of secondary nature with main sources of data constituting of articles in journals, newspapers and data downloaded from various websites as mentioned in annexure.
Introduction to Health Insurance Part~1
Definition of health care financing
Health insurance in a narrow sense would be ‘an individual or group purchasing health care coverage in advance by paying a fee called premium. In its broader sense, it would be any arrangement that helps to defer, delay, reduce or altogether avoid payment for health care incurred by individuals and house holds.
In other words health care financing
? mobilization of funds for health care ? allocation of funds to the regions and population groups and for specific types of health care ? mechanisms for paying health care
Features of Health Insurance and Indian Scenario
Reimbursement system: This system refers to the manner in which providers are paid. The characteristics of health insurance programmed can be described as follows
• In the traditional indemnity system, customers first incur expenditure on services and later submit claim to insurance company for reimbursement (such as, med claim insurance scheme). • Managed indemnity in which a third party administrator (TPA) takes care of the claim settlement of enrollees and directly reimburses service provider. • Insurer pays service provider a fixed amount, out of which provider will serve health needs of enrollees for a specific period. • Reimbursement can be fee-for-service, which would involve charging for each individual service, such as inpatient bed-days, drugs, investigations.
•
Case-specific reimbursement based on category of patient admitted. Under this system admissions are grouped into categories called diagnostic-related groups (DRGs), based on their clinical characteristics.
• The government’s fiscal effort measured as the proportion of total government expenditure spent on health again identifies India as a low performer. • In a global ranking of the shares of total public expenditure earmarked for health only 12 countries in the world had lower proportions spent on health.
• The out of pocket private spending dominates with 82 percent spending of all health spending from private sources. This is one of the highest in the world. • Globally only five countries have a higher dependence on private financing in the health sector (WHR 2000). • About 10 percent of Indians have some form of health insurance mostly formal sect or and government employees.
Introduction to Health Insurance Part~2
History of Healthcare Financing
The game is old but the rules are new, and in the process of changing further. From being ensconced in a monopoly run from the nationalization days beginning 1956, the insurance industry has indeed woken up — to a de-regulated environment, with the industry space now being populated by several private players in partnerships with multinational insurance giants. The opening of the insurance sector in India has been a landmark event in India’s economic history. Gone are the days of the domination by the LIC and GIC when ordinary citizens had to work according to their whims and fancies. Over the past one year, the traditional notion of insurance has been turned on its head. Today insurance offers complete solutions to create wealth, protect health and insure life. Added to this, the profile of the Indian customer is changing. Today, while boundaries between various financial products are getting blurred, people are increasingly looking not just at products but also at integrated financial solutions that can offer them stability of returns along with total protection. Insurance products will need to be customized to satisfy
these myriad needs of the customers and this where the private players come in bringing with them hopes of wider options and efficient service. The market is already seeing a rise in number of players and in making insurance products, new companies will have to adopt systems which factor in all potential risks. In such a scenario, it’ll be difficult to say what will be the differentiator across the different players — products, pricing or service? There is also the case of the neglected health insurance sector. Will there be more players venturing into this sector? The poor health scenario in India does offer a gamut of options for new players.
OPENING UP OF THE INSURANCE SECTOR When the insurance industry was nationalized, it was considered a landmark and a milestone on the way to the socialistic pattern of society that India had chosen after independence. However, with the passage of the Insurance Regulatory Development Act (IRDA) in 1999, things are quickly changing. The main features of the Act are: ??It requires the Indian promoter to invest either wholly in an insurance venture or team up with a foreign insurer, with a cap of 26% of equity for the foreign partner. ??The Indian promoter is permitted to divest only after 10 years to the Indian public, through a public offering of shares, at which time the equity structure will provide for equal participation between the Indian and foreign partner with a share of 26% each in the share capital. What the opening up of this sector actually does is open up a range of untapped opportunities for the new players, considering the potential market for buyers in the market is very high. It offers great scope for growth as the present insurance penetration is just 1.95% (ratio of insurance premium to gross domestic savings). (Source: knowledgedigest.com). For other countries, like Japan and South Korea the rate of penetration is greater than 10%. Countries like UK and France also have a penetration percentage closer to 10%.
Also what consumers need today are products that offer flexible options, with benefits unbundled and customizable to suit their diverse needs.
The Indian Insurance (Amendment) Bill 2001 came next, which had more changes in store: ??Cooperative societies are being recognized to carry on business. ??The training requirements are being modified as the existing norms are restrictive and putting constraints on the growth of corporate agency business in the country. ??A portion of the premium received from a customer can be paid as remuneration to an insurance intermediary, which has been defined to include insurance brokers and consultants. This doesn’t mean that public players are totally out of the market; in fact they continue to hold strong market share positions. Multinational insurers are keenly interested in emerging insurance because their home markets are saturated while emerging countries have low insurance penetrations and high growth rates.
Year 1912 1938 1956 1972 1999 2001
Important Happenings Insurance Act passed Insurance Act, 1938 Life Insurance industry nationalized General Insurance industry nationalized IRDA bill passed in Parliament to allow foreign players entry Insurance Amendment Bill 2001 passed by Parliament
From the above table we see that the first real attempt at insurance was carried out well before Independence, with the passing of the Insurance Act in 1912, which set down rules and regulations specific to the insurance industry. Then there was a more fundamental shakeup in 1938 with the Insurance Act, 1938 and this led to an insurance wing being set up, attached to the Ministry of Finance. At the time of nationalization of Life Insurance industry there were 176 (life and non-life) companies in the industry. The general insurance industry was nationalized in 1972. The next significant event was the passage of the Insurance Regulatory & Development Authority Act, which opened up the insurance sector to the private players. This was followed by the Indian Insurance (Amendment) Bill 2001 which dealt with the means by which insurers might access the new markets that had opened up and the role of brokers in the insurance market.
RATIONALE FOR FOCUS ON HEALTH CARE INSURANCE:
? Late 1970s Voluntary community based health insurance attracted considerable attention ? 1980’s financing of health care moved high on the agenda of the discussions on health policy ? Recurring theme in ? Executive Board Meeting of the WHO in 1986, ? World Health Assembly and the Commonwealth Health Ministers Conference in 1986 ? User charges dominating the policy debates of 1970s and 1990s ? Attention back on community based health insurance ? In developed countries the problem is containing the cost of health care In some developing countries the problem presents itself as how to maintain health spending and how to achieve “health for all” initiative.
WHY HEALTH INSURANCE (IMPORTANCE)
??Recognition
as an industry: In the mid 80's, the healthcare sector was recognized as an industry. Hence it became possible to get long term funding from the Financial Institutions. The Government also reduced the import duty on medical equipments and technology. ??Socio Economic changes: The rise of literacy rate, higher levels of income and increasing awareness through deep penetration of media channels, contributed to greater attention being paid to health. With the rise in the system of nuclear families, it became necessary for regular health check-ups and increase in health expenses. ??Brand Development: Many family-run business houses have set-up charity hospitals. By lending their name to the hospital, they develop a good image in the market, which further improves the brand image of products from their other businesses. ??Extension to related business: Some pharmaceutical companies like Wockhardt and Max India, have ventured into this sector as it is a direct extension to their line of business. TPAs IRDA defines TPA as “an insurance intermediary licensed by the Authority who, either directly or indirectly, solicits or effects coverage of, underwrite, collect, charge premium from an insured, or adjust or settle claims in connection with health insurance, except as an agent or broker or an insurer.”
THIRD PARTY ADMINISTRATORS (TPAS) TPAs are essentially insurance intermediaries, which undertake the entire administration of health plans for insurance companies. Apart from settling claims, TPAs also process business, offer customer service and technical support.
Private players have taken the lead and engaged TPAs to help them service policy holders who have taken health covers. • Iffco-Tokio, • Marine General Insurance, • ICICI Lombard General Insurance, • Reliance General Insurance and • Royal Sundaram General Insurance. They have already signed up their respective TPAs. The idea behind hiring TPAs is to reduce the high claim ratios by eliminating fraud cases. While TPAs' network with hospitals and interaction with doctors is expected to reduce claims substantially, insurers also wish to improve customer relationship through their TPAs. In a bid to give a shot in the arm to the health insurance sector, the Insurance Regulatory & Development Authority (IRDA) has allowed third party administrators (TPAs) in the health insurance sector to tie up with more than one insurer, but mandated a stringent code of conduct: ??IRDA (TPA-health services) Regulations 2001 has barred TPAs to advertise products without approval of insurance companies while envisaging strict confidentiality in information shared with insurers. ??A TPA also has to undergo a training of minimum three months in the field of Health insurance and have access to competent medical professionals to advise the insurance companies and the client on various matters. ??They would have to renew their licenses from IRDA every three years and inform the authority if there is any change in shareholder patterns involving more the 5 per cent equity. The Code of Conduct laid down by IRDA said that TPAs would have to bring to notice of insurers any adverse report or inconsistencies or any material fact that is relevant to the insurers business. ??It also says that TPAs would have to bring to notice of insurers any adverse report or inconsistencies or any material fact that is relevant to the insurers’ business. But the problem with TPAs is that the cost of these services have been factored into health plans of all the new players and they are 30 to 35% dearer than health plans of nationalized insurance companies. Anyway, at present TPAs do not allow individuals to avail of health insurance policies from them. The state general insurance companies
will deliberate on whether they can absorb the cost of hiring TPAs or else whether the cost of Med claims has to be revised upwards. They will also have to decide whether TPAs will service all policyholders or be limited to a certain clientele. There are strong reasons why some officials feel that appointing TPAs is not a commercially viable decision. For every Rs. 100 premium the insurance company collects, it spends Rs 141. Add to this the service charges payable to the TPA and the net outgo on the said premium would only increase. The problem gets compounded with IRDA’s ruling on TPA charges. IRDA has categorically stated that the service charge cannot be added to the premium. This m effectively means that TPA charges will have to be borne by the insurance company. The public insurance companies are caught in a catch-22 situation. They will not be able to increase the premium as the competition is intensifying and on the other hand it would be difficult to shoulder the burden of TPA charges over and above the existing problem of revenue deficit. This doesn’t mean though that there are no uses of TPAs. Since they analyze trends, they are able to keep a check on treatment pricing levels. A TPA with a good network can lower chances of fraud because of the steady business that it provides to the hospital. And the most important: the entry of TPAs would also mean cashless health care delivery to policyholders, along with trauma support and other advisory services. A cashless scheme under a TPA is a customized health insurance scheme generally devised as a Group Health insurance scheme and put in place by a Third Party Administrator (TPA). Here when the insured is hospitalized he/she need not pay for medical expenses incurred. Medical Expenses incurred are settled by the TPA directly with the concerned medical institution as per the terms and conditions of the health insurance package. Any amount that is not payable under the insurance scheme will be borne by the insured himself/herself and will have to be reimbursed by the TPA. This is quite unlike the med claim policy, which is basically a reimbursement scheme where the insured, when hospitalized, pays the medical institution, submits the claim to the insurance company and gets reimbursed as per the terms and conditions of the policy.
The Role of TPAs
Third party administrators (TPAs) are not technically managed care organizations but play an important role in health insurance markets. Neither insurance companies nor
care providers, they are intermediaries who bring together all components of healthcare, such as physicians, hospitals, clinics, long-term facilities, and pharmacies. • Their services include cashless service at hospitals, call centre support to policyholders, medical cost management, and management of claims and reimbursements. • They also provide services to the corporate sector in designing and managing health benefit packages for their employees. • Given the demand and supply-side complexities in health insurance and healthcare markets, TPAs provide an important link between insurance companies, healthcare providers and policyholders. • Intermediation by TPAs ensures that policyholders get hassle free services; insurance companies pay for efficient and cost effective services, and healthcare providers/policy holders get their reimbursements on time. • The core product or service of a TPA is ensuring cashless hospitalizations to policyholders. TPAs require skills to develop networks, manage finance, and delivery of appropriate healthcare services to its clients. • TPAs organize healthcare providers by establishing networks with hospitals, general practitioners, diagnostic centers, pharmacies, dental clinics, and physiotherapy clinics. They sign a memorandum of understanding with insurance companies according to which they inform policyholders about the network of healthcare delivery facilities and various systems and processes for settling claims. Policyholders are enrolled and registered with TPAs to avail of these services. In the event of hospitalization, health facilities are expected to inform the TPAs. The medical referee of the TPA examines the admissibility of the case and accordingly informs the healthcare facility to proceed with the treatment.
Revenue Generation
The major source of revenue for TPAs is the fees charged for providing various services. Insurance companies pay the fee according to the volume and scope of services provided by them and it usually a fixed percentage of the premium collected from the enrollees. However, TPAs may provide many other services to organizations for which the fee is paid by the organization directly. These services include: o Benefit management: TPAs help in designing appropriate health plans for the corporate sector and insurance companies. o Medical management: This is basically disease management and involves medical follow-up of the case. TPAs track the link. o Provider network management: This is the key task. TPAs need to negotiate with service providers regarding quality of care, credit facility, discounts, package pricing, priority appointments and admissions. Periodic review and evaluation of the performance of service providers is also vital.
o Claims administration: This involves the claim adjudication process. The tasks include documentation, checking eligibility and coverage, claim submission and arranging payment for the service provider. o Information and data management: TPAs can generate a lot of reports and database. These can be used as management tools for analysis and controlling cost and besides helping design new products.
Health service financing source
Health services financed broadly through private expenditure or public expenditure or external aid 1. Public expenditure includes all expenditure on health services by: a. Central and local government funds spent by state owned and parasitical enterprises as well as government and social insurance contributions. b. Where services are paid for by taxes, or compulsory health insurance contributions either by employers or insured persons or both this counts as public expenditure. 2. Voluntary payments by individuals or employers are private expenditure.
3. External sources refer to the external aid which comes through bilateral aid programmed or international non governmental organizations. 4. The ownership of the facilities used whether government by government, social insurance agencies, non profit organizations private companies or individuals is not relevant.
Mechanism of Health Care Financing
? ? ? ? ? General revenue or earmarked taxes social insurance contributions private insurance premiums community financing direct out of pocket payments
Each method ? distributes the financial burdens and benefits differently ? each method affects who will have access to health care ? financial protection
General revenue or earmarked taxes
? the most traditional way of financing health care ? finance a major portion of the health care (especially in low income countries)
The state collects its revenue from taxes. A portion of this is allocated for healthcare. Healthcare providers are paid from this allocation. Consumers get free service at point of delivery. However, they may have to pay a small nominal user fees.
Private insurance
? Private contract offered by an insurer to exchange a set of benefits for a payment of a specified premium. ? Marketed either by nonprofit or for profit insurance companies. ? Consumers voluntarily choose to purchase an insurance package that best matches their preference. ? Offered on individual and group basis. Under individual insurance the premium is based on that individuals risk characteristics. ? Major concern in private insurance is buyer’s adverse selection. ? Under group insurance, the premium is calculated on a group basis. Risk is pooled across age, gender and health status. Private or what is often also called “voluntary” insurance is a recent phenomena starting in an organized way some time in the mid-eighties through the public sector insurance companies. Prior to that these insurance companies did have group insurance schemes for their special clients (read big general insurance clients) but that covered an insignificant number of employees and their families. From mid ‘80s, the med claim scheme which is an individual hospitalization policy and does not cover comprehensive healthcare was started. In theory, the introduction of private health insurance can contribute to increasing the aggregate costs of health care in several different ways. Most of the arguments in favor of increasing health care costs due to private health insurance have to do with some disparity in the information available to parties involved in transactions in the health care and health insurance markets. A peculiar characteristic of private health services is that, unlike the public health sector, they provide almost entirely only curative care. Further, the private health sector is fully commoditized and totally unregulated with a complete absence of ethics in practice.
Community based financing
Refers to schemes based on three principles: community cooperation, local self reliance and pre payment
Factors for success of community financing
? Technical strength and institutional capacity of the local group ? Financial control as part of the broader strategy in local management and control of health care services ? Support received from outside organizations and individuals ? Links with other local organizations ? Diversity of funding ? Responding to other (non health) development needs of the community ? Ability to adapt to a changing environment Individuals, families or community groups make voluntary contributions towards meeting healthcare costs. The cost is shared among members regardless of individual use. This works out well for small groups. Community-based funds refer to schemes where members prepay a set amount each year for specified services. The premier are usually flat rate (not income-related) and therefore not progressive. Making profit is not the purpose of these funds, but rather improving access to services. Often there is a problem with adverse selection because of a large number of high-risk members, since premiums are not based on assessment of individual risk status. Exemptions may be adopted as a means of assisting the poor, but this will also have adverse effect on the ability of the insurance fund to meet the cost of benefits. Community-based schemes are typically targeted at poorer populations living in communities, in which they are involved in defining contribution level and collecting mechanisms, defining the content of the benefit package, and / or allocating the schemes, financial resources. Such schemes are generally run by trust hospitals or nongovernmental organizations (NGOs). The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Such schemes tend to be financed through patient collection, government grants and donations.
Social health insurance
Social insurance is an earmarked fund set up by government with explicit benefits in return for payment. It is usually compulsory for certain groups in the population and the premiums are determined by income (and hence ability to pay) rather than related to health risk. The benefit packages are standardized and contributions are earmarked for spending on health services. Social Health Insurance
This model introduces a fourth party in addition to the consumer, the provider and the state – the financing organization which mobilizes and manages the fund and pays the providers. Funds are obtained from mandatory income related contributions from all income earners and their employers and government subsidies from general taxation for those who have no income. The financing organizations are popularly known as plans. The major function of the state in this model is to enact and implement appropriate legislation to regulate the financing organization and the providers. Social health insurance is one of the options to increase financial resources for health through equitable and affordable contributions. Many experts also agree that social health insurance has a big potential to translate out-of-pocket payments to prepayment. In recent years, social health insurance, because of its potentials in contributing to universal coverage, financial protection, access and equity in financing and delivering health services, has gained more attention in this region. Social health insurance is included in policy level discussions in a number of countries as a potential alternative
source of financing that provides equitable access to needed health services regardless of the degree of health risks and the amount of contribution. This allows the insured members to pay health insurance premiums to the common pool according to their income, but use the necessary health services according to their needs.
Direct out of pocket
? Made by patients to private providers at the time a service is rendered. ? User fees refer to fees the patients have to pay to public hospitals, clinics, and health posts not to private sector providers. ? Proponents of user fees believe that the fee can increase revenue to improve the quality of public health services and expand coverage. ? Major objection raised against user fees had been on equity grounds. Out-of-pocket spending has three components:
• • •
Cost Sharing in Private Insurance Out of Pocket Expenses for Public Programs (flat fees paid each time an individual sees a doctor) Cost-Sharing in Public Programs (individual pays a percentage of bill for services or medication)
Each component has different implications and includes varying incentives and disincentives to the end-user. The type of Out-of-Pocket Expenditure (OPE) also plays a very important role in how individuals choose providers. For example, most patients tend to utilize those services that involve the least out-of-pocket expenditure. Typically, OPEs for hospital care are low; OPEs for ambulatory care are slightly higher; and OPEs for pharmaceuticals are the highest. As a result, there’s an implicit incentive for patients to use more hospital care than pharmaceuticals since hospital care receives a greater subsidy This is the traditional mechanism of financing health care
Services Provider
Consumer Payment
Doctors/Clinics/ Hospitals
But there are certain problems with this mechanism of financing • Out-of-pocket payments for health are the most inequitable among the class of resources that could be used to finance health services – other, more equitable, examples being, social insurance taxes, direct taxes, and the like. • Out-of-pocket spending on health does not take into account the losses owing to foregone income that result from poor health. If lost income were also to be included, the financial burden of health increases quite substantially for the lower quintiles. • The burden of out-of-pocket spending does not include the adverse effects on long-term health that might result from not seeking care in time. The poorest groups not only report fewer illnesses, but they obtain treatment for a smaller proportion of those reported, compared to the richest groups.
Insurance schemes in India categorized into : Mandatory, voluntary, employer based, and NGO based
Mandatory insurance ESIS and CGHS
The government-run schemes include the Central Government Health Scheme (CGHS) and the Employees State Insurance Scheme (ESIS).
Central Government Health Scheme (CGHS)
Since 1954, all employees of the Central Government (present and retired); some autonomous and semi-government organizations, MPs, judges, freedom fighters and journalists are covered under the Central Government Health Scheme (CGHS). This scheme was designed to replace the cumbersome and expensive system of reimbursements (GOI, 1994). It aims at providing comprehensive medical care to the Central Government employees and the benefits offered include all outpatient facilities, and preventive and primitive care in dispensaries. Inpatient facilities in government hospitals and approved private hospitals are also covered. This scheme is mainly funded through Central Government funds, with premiums ranging from Rs 15 to Rs 150 per month based on salary scales. The coverage of this scheme has grown substantially with provision for the nonallopathic systems of medicine as well as for allopathic. Beneficiaries at this moment are around 432 000, spread across 22 cities. The CGHS has been criticized from the point of view of quality and accessibility. Subscribers have complained of high out-ofpocket expenses due to slow reimbursement and incomplete coverage for private health care (as only 80% of cost is reimbursed if referral is made to private facility when such facilities are not available with the CGHS). Employee and State Insurance Scheme (ESIS) The enactment of the Employees State Insurance Act in 1948 led to formulation of the Employees State Insurance Scheme. This scheme provides protection to employees against loss of wages due to inability to work due to sickness, maternity, disability and death due to employment injury. It offers medical and cash benefits, preventive and primitive care and health education. Medical care is also provided to employees and their family members without fee for service. Originally, the ESIS scheme covered all power-using non-seasonal factories employing 10 or more people. Later, it was extended to cover employees working in all non-power using factories with 20 or more persons. While persons working in mines and plantations, or an organization offering health benefits as good as or better than ESIS, are specifically excluded. Service establishments like shops, hotels, restaurants, cinema houses, and road transport and news papers printing are now covered. The monthly wage limit for enrolment in the ESIS is Rs. 6 500, with a prepayment contribution in the form of a payroll tax of 1.75% by employees, 4.75% of employees' wages to be paid by the employers, and 12.5% of the total expenses are borne by the state governments. The number of beneficiaries is
over 33 million spread over 620 ESI centers across states. Under the ESIS, there were 125 hospitals, 42 annexes and 1 450 dispensaries with over 23 000 beds facilities. The scheme is managed and financed by the Employees State Insurance Corporation (a public undertaking) through the state governments, with total expenditure of Rs 3 300 million or Rs 400/- per capita insured person. The ESIS program has attracted considerable criticism. A report based on patient surveys conducted in Gujarat found that over half of those covered did not seek care from ESIS facilities. Unsatisfactory nature of ESIS services, low quality drugs, long waiting periods, impudent behavior of personnel, lack of interest or low interest on part of employees and low awareness of ESI procedures, were some of the reasons cited.
Other Government Initiatives
Apart from the government-run schemes, social security benefits for the disadvantaged groups can be availed of, under the provisions of the Maternity Benefit (Amendment) Act 1995, Workmen’s Compensation (Amendment) Act 1984, Plantation Labour Act 1951, Mine Mines Labour Welfare Fund Act 1946, Beedi Workers Welfare Fund Act 1976 and Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. The Government of India has also undertaken initiatives to address issues relating to access to public health systems especially for the vulnerable sections of the society. The National Health Policy 2002 acknowledges this and aims to evolve a policy structure, which reduces such inequities and allows the disadvantaged sections of the population a fairer access to public health services. Ensuring more equitable access to health services across the social and geographical expanse of the country is the main objective of the policy. It also seeks to increase the aggregate public health investment through increased contribution from the Central as well as state governments and encourages the setting up of private insurance instruments for increasing the scope of coverage of the secondary and tertiary sector under private health insurance packages. The government envisages an increase in health expenditure as a % of GDP from existing 0.9% to 2.0 % by 2010 and an increase in the share of central grants from the existing 15% to constitute at least 25% of total public health spending by 2010. The State government spending for health in turn would increase from 5.5% to 7% of the budget by 2005, to be further increased to 8% by 2010. The National Population Policy (NPP) 2000, envisages the establishment of a family welfare-linked health insurance plan. As per this plan, couples living below the poverty
line who undergo sterilization with not more than two living children would be eligible for insurance. Under this scheme, the couple along with their children would be covered for hospitalization not exceeding Rs 5 000 and a personal accident insurance cover for the spouse undergoing sterilization. The Institute of Health Systems (IHS ), Hyderabad has been entrusted the responsibility of operational zing the mandate of the NPP 2000. The initial scheme proposed by the HIS was discussed at a workshop in June 2003. The consensus at the meeting was that the scheme needed further improvement prior to its implementation even as a pilot project. In keeping with the recommendations of the Tenth Five Year Plan and the National Health Policy (NHP) 2002 , the Department of Family Welfare is also proposing to commission studies in eight states covering eight districts, to generate district-specific data, which is essential for conceptualization of a reasonable and financially viable insurance scheme. The current plan – the Tenth Five Year Plan (2002-07) - also focuses on exploring alternative systems of health care financing including health insurance so that essential, need-based and affordable health care is available to all. The urgent need to evolve, implement and evaluate an appropriate scheme for health financing for different income groups is acknowledged. In the past, the government has tried to ensure that the poor get access to private health facilities through subsidy in the form of duty exemptions and other such benefits. Social health insurance for families living below the poverty line has been suggested as a mechanism for reducing the adverse economic consequences of hospitalization and treatment for chronic ailments requiring expensive and continuous care. In the budget for the year 2002-2003, an insurance scheme called Janraskha was introduced, with the aim of providing protection to the needy population. With a premium of Re 1/- per day, it ensured indoor treatment up to Rs 3 000 per year at selected and designated hospitals and outpatient treatment up to Rs 2 000 per year at designated clinics, including civil hospitals, medical colleges, private trust hospitals and other NGO-run institutions. A few states have started implementing this scheme under pilot phase. In the budget for the period 2003-2004, another initiative of community-based health insurance has been announced. This scheme aims to enable easy access of less advantaged citizens to good health services, and to offer health protection to them. This policy covers people between the ages of three months to 65 years. Under this scheme, a premium equivalent to Re 1 per day (or Rs 365 per year) for an individual, Rs 1.50 per day for a family of five (or Rs 548 per year), and Rs 2 per day for a family of seven (or Rs 730 per year), would entitle them to get reimbursement of medical expenses up to Rs 30000 towards hospitalization, a cover for death due to accident for Rs 25000 and
compensation due to loss of earning at the rate of Rs 50 per day up to a maximum of 15 days. The government would contribute Rs 100 per year towards the annual premium, so as to ensure the affordability of the scheme to families living below the poverty line. The implementation of this scheme rests with the four public sectors insurance companies. The government also offers assistance by way of Illness Assistance Funds, which have been set up by the Ministry of Health and Family Welfare at the national level and in a few states. State Illness Assistance Funds exist in: Andhra Pradesh, Bihar, Goa, Gujarat, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mizoram, Rajasthan, Sikkim, Tamil Nadu, Tripura, West Bengal, NCT of Delhi and UT of Pondicherry. A National Illness Assistance Fund (NIAF) was set up in 1997, with the scheme being reviewed in January 1998. Through this, three Central Government hospitals and three nationallevel institutes have been sanctioned Rs 1000000 each at a time from the NIAF to provide immediate financial assistance to the extent of Rs 25000 per case to poor patients living below the poverty line and who are undergoing treatment in these hospitals / institutions. Thereafter the scheme has been extended to few other institutes across the country and provides Rs 25 000 – Rs 50 000 per case. Voluntary health insurance schemes • Are for individuals and corporations. • Available mainly through the General Insurance Corporation (GIC) of India and its four subsidiaries- a government owned monopoly. • Financed from household and corporate funds. Voluntary health insurance schemes or private-for-profit schemes In private insurance, buyers are willing to pay premium to an insurance company that pools people with similar risks and insures them for health expenses. The key distinction is that the premiums are set at a level, which provides a profit to third party and provider institutions. Premiums are based on an assessment of the risk status of
the consumer (or of the group of employees) and the level of benefits provided, rather than as a proportion of the consumer’s income. In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies (National Insurance Corporation, New India Assurance Company, Oriental Insurance Company and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide voluntary insurance schemes. The Life Insurance Corporation offers Ashadeep Plan II and Jeevan Asha Plan II. The General Insurance Corporation offers Personal Accident policy, Jan Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim policy, Cancer Insurance policy, Bhavishya Arogya policy and Dreaded Disease policy (Srivastava 1999 as quoted in Bhat R & Malvankar D, 2000) Of the various schemes offered, Mediclaim is the main product of the GIC. The Medical Insurance Scheme or Med claim was introduced in November 1986 and it covers individuals and groups with persons aged 5–80 yrs. Children (3 months – 5 yrs) are covered with their parents. This scheme provides for reimbursement of medical expenses (now offers cashless scheme) by an individual towards hospitalization and domiciliary hospitalization as per the sum insured. There are exclusions and preexisting disease clauses. Premiums are calculated based on age and the sum insured, which in turn varies from Rs 15 000 to Rs 5 00 000. In 1995/96 about half a million Med claim policies were issued with about 1.8 million beneficiaries (Krause Patrick 2000). The coverage for the year 2000-01 was around 7.2 million. Another scheme, namely the Jan Arogya Bima policy specifically targets the poor population groups. It also covers reimbursement of hospitalization costs up to Rs 5 000 annually for an individual premium of Rs 100 a year. The same exclusion mechanisms apply for this scheme as those under the Med claim policy. A family discount of 30% is granted, but there is no group discount or agent commission. However, like the Mediclaim, this policy too has had only limited success. The Jan Arogya Bima Scheme had only covered 400000 individuals by 1997. The year 1999 marked the beginning of a new era for health insurance in the Indian context. With the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance sector was opened to private and foreign participation, thereby paving the way for the entry of private health insurance companies. The Bill also facilitated the establishment of an authority to protect the interests of the insurance holders by regulating, promoting and ensuring orderly growth of the insurance industry. The bill allows foreign promoters to hold paid up capital of up to 26 percent in an Indian company and requires them to have a capital of Rs 100 crore alongwith a business plan
to begin its operations.Currently, a few companies such as Bajaj Alliance, ICICI, Royal Sundaram, and Cholamandalam among others are offering health insurance schemes. The nature of schemes offered by these companies is described briefly.
Bajaj Allianz:
Bajaj Alliance offers three health insurance schemes namely, Health Guard, Critical Illness Policy and Hospital Cash Daily Allowance Policy. - The Health Guard scheme is available to those aged 5 to 75 years (not allowing entry for those over 55 years of age), with the sum assured ranging from Rs 1000000 to 5000000 It offers cashless benefit and medical reimbursement for hospitalization expenses (pre and post-hospitalization) at various hospitals across India (subject to exclusions and conditions). In case the member opts for hospitals besides the empanelled ones, the expenses incurred by him are reimbursed within 14 working days from submission of all the documents. While pre-existing diseases are excluded at the time of taking the policy, they are covered from the 5th year onwards if the policy is continuously renewed for four years and the same has been declared while taking the policy for the first time. Other discounts and benefits like tax exemption, health checkup at end of four claims free year, etc. can be availed of by the insured. - The Critical Illness policy pays benefits in case the insured is diagnosed as suffering from any of the listed critical events and survives for minimum of 30 days from the date of diagnosis. The illnesses covered include: first heart attack; Coronary artery disease requiring surgery: stroke; cancer; kidney failure; major organ transplantation; multiple sclerosis; surgery on aorta; primary pulmonary arterial hypertension, and paralysis. While exclusion clauses apply, premium rates are competitive and high-sum insurance can be opted for by the insured. - The Hospital Cash Daily Allowance Policy provides cash benefit for each and every completed day of hospitalization, due to sickness or accident. The amount payable per day is dependant on the selected scheme. Dependant spouse and children (aged 3 months – 21years) can also be covered under the Policy. The benefits payable to the dependants are linked to that of insured. The Policy pays for a maximum single hospitalization period of 30 days and an overall hospitalization period of 30/60 completed days per policy period per person regardless of the number of confinements to hospital/nursing home per policy period.
ICICI Lombard:
ICICI Lombard offers Group Health Insurance Policy. This policy is available to those aged 5 – 80 years, (with children being covered with their parents) and is given to corporate bodies, institutions, and associations. The sum insured is minimum Rs 15 000/- and a maximum of Rs 500 000/-. The premium chargeable depends upon the age of the person and the sum insured selected. A slab wise group discount is admissible if the group size exceeds 100. The policy covers reimbursement of hospitalization expenses incurred for diseases contracted or injuries sustained in India. Medical expenses up to 30 days for Pre-hospitalization and up to 60 days for post-hospitalization are also admissible. Exclusion clauses apply. Moreover, favourable claims experience is recognized by discount and conversely, unfavourable aims experience attracts loading on renewal premium. On payment of additional premium, the policy can be extended to cover maternity enefits, pre-existing diseases, and reimbursement of cost of health check-up after four consecutive claims-free years.
Royal Sundaram Group:
The Shakthi Health Shield policy offered by the Royal Sundaram group can be availed by members of the women’s group, their spouses and dependent children. No age limits apply. The premium for adults aged up to 45 years is Rs 125 per year, for those aged more than 45 years is Rs 175 per year. Children are covered at Rs 65 per year. Under this policy, hospital benefits up to Rs 7 000 per annum can be availed, with a limit per claim of Rs 5 000. Other benefits include maternity benefit of Rs 3 000 subject to waiting period of nine months after first enrolment and for first two children only. ?
Cholamandalam General Insurance:
The benefits offered (in association with the Paramount Health Care, a re-insurer) in case of an illness or accident resulting in hospitalization, are cash-free hospitalization in more than 1 400 hospitals across India, reimbursement of the expenses during prehospitalization (60 days prior to hospitalization) and post- hospitalization (90 days after discharge) stages of treatment. Over 130 minor surgeries that require less than 24 hours hospitalization under day care procedure are also covered. Extra health covers like general health and eye examination, local ambulance service, hospital daily allowance, and 24 hours assistance can be availed of.
Employer-based schemes
Employers in both the public and private sector offers employer-based insurance schemes through their own employer-managed facilities by way of ump sum payments, reimbursement of employee’s health expenditure for outpatient care and hospitalization, fixed medical allowance, monthly or annual irrespective of actual expenses, or covering them under the group health insurance policy. The railways, defence and security forces, plantations sector and mining sector provide medical services and / or benefits to its own employees. The population coverage under these schemes is minimal, about 30-50 million people.
Insurance offered by NGOs / community-based health insurance
Community-based schemes are typically targeted at poorer populations living in communities, in which they are involved in defining contribution level and collecting mechanisms, defining the content of the benefit package, and / or allocating the schemes, financial resources. Such schemes are generally run by trust hospitals or nongovernmental organizations (NGOs). The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Such schemes tend to be financed through patient collection, government grants and donations. Increasingly in India, CBHI schemes are negotiating with the for profit insurers for the purchase of custom designed group insurance policies. However, the coverage of such schemes is low, covering about 30-50 million indicates that many community-based insurance schemes suffer from poor design and management, fail to include the poorest-of-the poor, have low membership and require extensive financial support. Other issues relate to sustainability and replication of such schemes.
Some examples of community-based health insurance schemes are discussed herein: • Self-Employed Women’s Association (SEWA), Gujarat : This scheme established in 1992, provides health, life and assets insurance to women working in the informal sector and their families. The enrolment in the year 2002 was 93 000. This scheme operates in collaboration with the National Insurance Company (NIC). Under SEWA’s most popular policy, a premium of Rs 85 per individual is paid by the woman for life, health and assets insurance. At an additional payment of Rs 55, her husband too can be covered. Rs 20 per member is then paid to the National Insurance Company (NIC) which provides coverage to a maximum of Rs 2000 per person per year for hospitalization. After being hospitalized at a hospital of one’s choice (public or private), the insurance claim is submitted to SEWA. The responsibility for enrolment of members, for processing and approving of claims rests with SEWA. NIC in turn receives premiums from SEWA annually and pays them a lumpsum on a monthly basis for all claims reimbursed. • Another CBHI scheme located in Gujarat, is that run by the Tribhuvandas Foundation (TF), Anand. This was established in 2001, with the membership being restricted to members of the AMUL Dairy Cooperatives. Since then, over 1 00 000 households have been enrolled under this scheme, with the TF functioning as a third party insurer. • The Mallur Milk Cooperative in Karnataka established a CBHI scheme in 1973. It covers 7 000 people in three villages and outpatient and inpatient health care are directly provided. • A similar scheme was established in 1972 at Sewagram, Wardha in Maharashtra. This scheme covers about 14 390 people in 12 villages and members are provided with outpatient and inpatient care directly by Sewagram. • The Action for Community Organization, Rehabilitation and
Development (ACCORD), Nilgiris, Tamil Nadu was established in 1991. Around 13 000 Adivasis (tribals) are covered under a group policy purchased from New India Assurance. • Another scheme located in Tamil Nadu is Kadamalai Kalanjia Vattara Sangam (KKVS), Madurai. This was established in 2000 and covers members of women’s self-help groups and their families. Its enrolment in 2002 was around 5 710, with the KKVS functioning as a third party insurer. • The Voluntary Health Services (VHS), Chennai, Tamil Nadu was established in 1963. It offers sliding premium with free care to the poorest. The benefits include discounted rates on both outpatient and inpatient care, with the VHS functioning as both insurer and health care provider. In 1995, its membership was 124 715. However, this scheme suffers from low levels of cost recovery due to problems of adverse selection. • Raigarh Ambikapur Health Association (RAHA), Chhatisgarh was established in 1972, and functions as a third party administrator. Its membership in the year 1993 was 72000.
Constraints on Health Insurance Contracts
Health insurance is complex and there are serious market failure problems. In any market-driven system, what should be produced, how it should be produced and for whom it should be produced are determined by market forces. Competitive environments take care that resources are used efficiently (at lowest cost) and effectively (with optimum outcomes). However, because of various demand and supplyside imperfections, there are inherent problems in health insurance markets. Important constraints on insurance contracts are – Moral hazard; – Adverse selection; – Covariate risks; and – Information problems.
Moral hazard:
A serious problem, it arises because policyholders would like to take decisions and actions which maximize their benefit and do not want to bear the full cost. The seminal works of Arrow (1963) and Pauly (1968, 1974), who proposed the moral hazard problem in medical care suggest that the policyholder does not consider the insurer’s costs. Unregulated healthcare markets and private insurance encourage this behavior since insurance lowers or avoids the cost of treatment at the point of treatment consumers tend to demand more (consumer moral hazard). Providers have an incentive to render more or unnecessary care than might be medically appropriate (provider induced moral hazard). To combat this problem, most insurance companies use mechanisms and conditionality which in the end only burdens policyholders with part of cost .Some of the mechanisms insurance companies have adopted are copayments or co-insurance, deductibles, or a reduced premium bonus for the future. Another possibility of coping with moral hazard is to arrange special contracts
Adverse selection:
The works of Akerlof (1970), Spence (1973), Stiglitz (1975), and Rothschild and Stiglitz (1976) have pioneered the concept of the adverse selection problem. Adverse selection arises when persons belonging to high-risk, groups seek coverage and the insurer cannot identify the risk. All policy holders are required to pay the same premium, whereas those belonging to higher-risk groups are likely to consume higher than the average quantity of services; they will also find the insurance policy more attractive, while those with good health will find insurance premium too high. Fewer and fewer, good cases will enroll in the insurance scheme and, as a result, the insurer finds having a pool of more risk cases. As Newberry and Stiglitz (1981) and Newberry (1989) have shown, insurance pools work best with easily identifiable risks.
Covariate risks:
The basic objective of any insurance mechanism is to protect individuals from risk. In most situations, the insurer helps in protecting policyholders from unique health risks, and it is expected that these risks are not related to others in the insurance pool. However, if covariate or collective risks – possible risks that would cause damage to many or even all members of the pool at the same time occur, there is nothing to be gained by cooperation The stronger the degree of positive covariance, the higher will be the cost, whereas negatively correlated risks will have the effect of reducing the total cost of risk-bearing High incidence and prevalence of communicable diseases in a community can give rise to high covariate risks. In a study of claims and reimbursements, about 22 per cent of the cases arose from communicable diseases In
India, 50 per cent of deaths take place because of communicable diseases. If all policyholders face similar risks, the risk cannot be reduced much through having insurance.
Information problem:
Availability of information would have a significant bearing on the development of insurance contracts. The severity of a moral hazard problem and adverse selection problems will depend on differences in the availability of information between insurer and policyholders. In order to address this problem, insurance companies need significant investments in infrastructure and development of systems .
Innovations in Health Care Financing
The healthcare industry in India has come a long way from the days when those who could afford it had to travel abroad to get highly specialized services such as cardiac surgery, while others had to do without it. Today, patients from neighboring countries in Asia are coming to India to receive specialized medical treatment. Not only is India meeting international standards, but at prices that compare very favorably with developed countries. The report takes a look at the healthcare industry in India; how it has evolved, the innovations that have taken place in the industry, the emerging trends and the opportunities for the future. Through a few significant players in the industry, the report examines the competencies that India has developed in healthcare. It explores how these healthcare providers are endeavoring to provide services to India's vast and widely spread population, through innovative methods.
In 2003, a CII and Mckinsey study projected that India's healthcare market could touch Rs.3,200 million by 2012 from the existing Rs.1,030 million. It also predicted that India
had a great future as a major destination for medical tourism. India is already a preferred healthcare destination for neighboring countries due to the low cost and high quality treatment available here. With the arrival of tele-medicine in 1999, several large healthcare facilities in India have been linked up with healthcare facilities in the neighboring countries and the rest of Asia. Tele-medicine has enabled international patients to obtain specialized care in from India. In the recent past, there have been several innovations in the healthcare services industry in India, giving patients a new experience of healthcare. The Amrita Institute of Medical Sciences' fully digital, computerized and networked facility enabled it to offer tele-medicine services such as tele-consultation, fetal tele-medicine and tele-surgery. Aravind Eye hospitals' Internet kiosks in remote rural areas enabled poor villagers to consult top eye physicians online. Apollo Hospitals covered the entire gamut of healthcare services, from primary, secondary and tertiary care to diagnostic services and pharmacies. The innovations in products and services have made its hospitals a one stop location for people's healthcare needs. The hub and spoke model was another innovation in the diagnostic centers and pathology laboratories segment. All these innovations have given patients better service. The innovations whether in business models, in marketing & promotion or in the use of technology, have created unique experiences for patients. Facilities such as Aravind Eye hospitals have impressed people worldwide, and have been the subject of study, with a view to replicating their success in other countries. India has become a major destination for quality healthcare for neighboring countries such as Pakistan, Nepal and Bangladesh.
Health care financing in India
THE INDIAN HEALTHCARE MARKET – UNLIMITED POTENTIAL With over 1 billion people and a healthy GDP growth India’s healthcare industry is on an upward trend. Healthcare has been given priority status by both the Central and individual state governments. Favorable policies and initiatives undertaken by the Government of India is expected to increase the number of new hospitals and improve medical facilities. Consequently this has increased the demand for capital equipment. Mumbai city alone has an estimated 52 Municipal hospitals, 14 Central and State Government owned hospitals, 32 trust hospitals (both Government and private) and 1091 private hospitals and around 5000 post-graduate doctors. The medical market can be regarded as a new motor of the Indian economy . Government health provisions: Number of Facilities PRIMARY CARE
PRIMARY HEALTH CENTERS PRIMARY HEALTH POSTS URBAN HEALTH POSTS
SECONDARY CARE TERTIARY CARE
DISTRICT AND TALUK HOSPITAL COMMUNITY HEALTH SECTOR CENTERS HOSPITAL AND HOSPITALS ESI AND PUBLIC MEDICAL COLLEGES
23,000 13,200
15,00 44,00
24,00
1,200
162
Source: McKinsey Analysis *
An area of note in India’ s healthcare sector is the opening up and privatization of the health insurance sector. This has a great impact on the medical device industry. Privatization of the insurance sector will have a positive impact on the device market. As the number of products and competitors increase in the market, consumers will start comparing and opt for the best. Insurance coverage will increase and enhanced services will prompt people to get sophisticated tests done more often. The entire device industry will benefit from these developments especially diagnostic imaging, clinical diagnostics, digital radiography and images integration, and intensive and critical care. The Indian healthcare industry is estimated at US $ 22 billion and the medical device market is estimated at US $ 1.85 billion and growing at 15% per annum. The conditions for exporting to India have become very conducive and 50%of the demand for medical equipment can be met only from imports out of which 70% of Electronic equipment is already imported. Estimated and Projected Medical Device Market Size in India
Source: Diagnostic Business Opportunities in India & McKinsey Analysis
Telemedicine services in India are growing very fast which again increases the demand for diagnostic medical equipment. Two other areas, which are growing rapidly, are Emergency medical services and clinical waste management. Medical tourism has witnessed a steady growth of 30% per annum.
Health care systems of India
India faces many common challenges stemming from rapid industrialization and integration into a global marketplace. Improving health system performance and the health status of their populations will remain major national goals in the years to come.
•
Equitable access to quality care: In India improving access to both
preventive and curative services is seen as a major priority by national health officials. India generally expends less on rural public health resources resulting in a lower level of immunization (67% of the population) and greater variability in basic sanitation infrastructure in
rural areas. there are now concerns that the standard of rural health care may actually be slipping as the share of health spending picked up by the central government has decreased by half over the last 20 years.
•
Affordability: This is a growing concern at a time when new medical treatments
and drugs, while effective, are becoming more expensive. Due to lack of health insurance coverage, the majority of health care expenses are still paid out-ofpocket by patients and their families at the time of care. Unaffordable health care has two serious consequences: 1) many patients are not getting beneficial services; and 2) when patients do get care, its costs create long-term personal financial hardships.
•
Sustainability: Sustainability of national health care programs will be an
ongoing goal for all emerging economies as access to and demands for more costly services increase. Currently, Mexico spends 5.6% of GDP on health care; India, 5.2%; and China, 2.7%.Ensuring system efficiency will be particularly important in the years to come as demographic trends put pressure on the financing of all public services, including health care. Partially as a consequence of growing affluence, the population of India is aging, implying greater future needs together with a shrinking tax base. As a result of its one-child policy, China may face the most serious problem. By 2040, there are expected to be only 2 working people for each person over 60 years old, compared to 6.4 in 2000.
Issues and challenges in Health Care Financing
Clearly major concerns exist in all three areas of health policy that have been highlighted earlier – in the overall costs of care, financial equity and the quality of care. A sustained improvement in these areas would play a significant role in advancing the primary goal of health policy – health, itself. The government could essentially adopt one of two methods to address these issues. The first option is to do nothing at all beyond what it has already done. This, unfortunately, does not imply an unchanged situation. • First, the Indian health sector would have to contend with the emergence of the private health insurance sector, given the passage of the Insurance Regulatory and Development Authority (IRDA) Bill. • Second, over the longer run, it would have to contend with an aging population and the increasing burden of expensive chronic illnesses, such as cancer, diabetes and heart disease, with substantial implications for the health budgets of the poor and of the government.11
Health sector and its financing: present scene and issues for the future
• During the last 50 years India has developed a large government health infrastructure with more than 150 medical colleges, 450 district hospitals, 3000 Community Health Centers, 20,000 Primary Health Care centers and 130,000 Sub-Health Centers. On top of this, there are large number of private and NGO health facilities and practitioners scatters though out the country. • Over the past 50 years India has made considerable progress in improving its health status. Death rate has reduced from 40 to 9 per thousand, infant mortality rate reduced from 161 to 71 per thousand live births and life expectancy increased from 31 to 63 years. • India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks. Insurance is limited to only a small proportion of people in the organized sector covering less than 10% of the total population. Currently there is no mechanism or infrastructure for collecting mandatory premium among the large informal sector. • Even in terms of the existing schemes, there is insufficient and inadequate information about the various schemes. Data gaps also prevail. Much of the focus of the existing schemes is on hospital expenses. There continues to be lack of awareness among people about health insurance. • In spite of existing regulation in some States, the private sector continues to operate in an almost unhindered manner. The growth of health insurance increases the need for licensing and regulating private health providers and developing specific criteria to decide upon appropriate services and fees. • Health insurance per se, suffers from problems like adverse selection, moral hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the absence of any costing mechanisms, there is difficulty in calculating the premium. There is also a need to evolve criteria to be used for deciding upon target groups, who would avail of the SHI scheme/s and also to address issues relating to whether indirect costs would be included in health insurance. Health insurance can improve access to good quality health care only if it is able to provide for health care institutions with adequate facilities and skilled personnel at affordable cost.
Given this scenario, the challenge, then, for Indian policy-makers is to find ways to improve upon the existing situation in the health sector and to make equitable, affordable and quality health care accessible to the population, especially the poor and the vulnerable sections of the society. It is in a way inevitable that the state reforms its public health delivery system and explores other social security options like health insurance. Implementing regulations would be one, but by no means the best mechanism to contain provider behavior and costs. This can only be done by developing mechanisms where government and households can together pool their funds. This could be one way of controlling provider behaviour. There is an urgent need to document global and Indian experiences in social health insurance. Different financing options would need to be developed for different target groups. The wide differentials in the demographic, epidemiological status and the delivery capacity of health systems are a serious constraint to a nationally mandated health insurance system. Given the heterogeneity of different regions in India and the regional specifications, one would need to undertake pilot projects to gather more information about the population to be targeted under an insurance scheme and develop options for different population groups. Health policy-makers and health systems research institutions, in collaboration with economic policy study institutes, need to gather information about the prevailing disease burden at various geographical regions; to develop standard treatment guidelines, to undertake costing of health services for evolving benefit packages to determine the premium to be levied and subsidies to be given; and to map health care facilities available and the institutional mechanisms which need to be in place, for implementing health insurance schemes. Skill building for the personnel involved, and capacity-building of all the stakeholders involved, would be a critical component for ensuring the success of any health insurance programme. The success of any health insurance scheme would depend on its design, the implementation and monitoring mechanisms which would be set in place and it would also call for restructuring and reforming the health system, and developing the necessary prerequisites to ensure its success. However, many challenges remain and these are: life expectancy 4 years below world average, high incidence of communicable diseases, increasing incidence of noncommunicable diseases, neglect of women's health, considerable regional variation and threat from environment degradation. It is estimated that at any given point of time 40 to 50 million people are on medication for major sickness in India. About 200 million workdays are lost annually due to sickness. Survey data indicate that about 60% people use private health providers for outpatient treatment while 60 % use government
providers for in-door treatment. The average expenditure for care is 2-5 times more in private sector than in public sector. India spends about 6% of GDP on health expenditure. Private health care expenditure is 75% or 4.25% of GDP and most of the rest (1.75%) is government funding. At present, the insurance coverage is negligible. Most of the public funding is for preventive, primitive and primary care programmed while private expenditure is largely for curative care. Over the period the private health care expenditure has grown at the rate of 12.84% per annum and for each one percent increase in per capital income the private health care expenditure has increased by 1.47%. Number of private doctors and private clinical facilities are also expanding exponentially. Indian health financing scene raises number of challenges, which are: • Increasing health care costs, • High financial burden on poor eroding their incomes, • Increasing burden of new diseases and health risks and • Neglect of preventive and primary care and public health functions due to under funding of the government health care. Given the above scenario exploring health-financing options becomes critical. Health Insurance is considered one of the financing mechanisms to over come some of the problems of our system.
MENTAL HEALTH: DIRECTIONS FOR FUTURE
All countries in the Region are facing a formidable challenge in expanding health insurance as an alternative mix, together with other mechanisms of health care financing. The situation is much more complex, especially in least-developed countries (LDC) of the Region, where most payments are made at the time when people seek allopathic or traditional health care, which is sometimes more than they can afford to pay. For the poor, who are unlikely to have any prepayment schemes and are frequently unable to benefit from tax-funded subsidized public health care, the out-of-
pocket payment (OOP) is the only mechanism for them to ensure adequate health care. It is thus difficult to have a sustainable, effective and equitable health care system facing a heavy burden due to the heavy OOP expenditure in the long run. The following are some of the possible health care financing policy options for national health policy-makers and planners to consider while formulating health policies and reforms.
Increasing Public Allocation
Almost all countries in the Region have low investment in health, with limited government revenue, especially due to the downturn in economic situation, increasing unemployment and high inflation Etc. While they have realized that health sector has to compete with all other sectors and the government budget is subject to political decision, the most obvious option of health financing for all governments still to be considered is to increase the level of resources in health financed through general revenue and also by increasing the level of public and quasi-public finance (social health insurance). There are many valid reasons for countries to increase the public investment in health care. Policy-makers need to review the differential allocation among sectors and adopt their fiscal policy in order to adjust the financial allocations so that the health sector can have a higher level of resources. According to the WHO-CMH, each 1% rise in income leads to a slightly more than 1% rise in health spending. The national income in countries of the Region is rising steadily over the years. While the annual economic growth might have been slowing down a while due to the Asian economic crisis of the late 1990s, most countries are recovering quickly. The annual growth of the health budget for public spending should be at par with, or even more than the overall annual economic growth. While a few countries are continuously facing internal civil strife and political unrest, many have experienced stable political situations. Even in countries experiencing conflict, peace initiatives are in progress. Once the socioeconomic burden of civil strife or political instability is under control, there could be increasing concentration on social development including health. There is also the possibility of increasing the allocation to health sector through foreign assistance in grants and loans. National policy-makers need to be aware of the drawbacks of such external inputs, imposing a greater share of in non-priority areas, limitation to pay health workers' remuneration, poor governance, and heavy investment in material capital rather than human and social capital.
Expansion of the SHI Coverage
SHI schemes in most countries are of different types and have varying degrees of coverage, and their development too is in different stages. Governments should further develop, expand and consolidate them. Most countries especially LDCs, would need financial inputs from external sources for expanding appropriate risk-pooling systems, especially those schemes designed to expand the membership among the poor. With improvement in employment conditions both in quantity and quality, SHI schemes have the highest potential to improve health care coverage. Social security and social health insurance schemes that are covering only regular income earners/employees could extend their coverage to their families/dependents, without additional investment. Those countries where community health insurance schemes are well established should also find ways and means to expand and consolidate them. There is potential for expansion in countries which are already experienced with community-based SHI schemes and other community-based financing programmes. Some form of subsidy, such as parliamentarians supporting prepayment for indigents, or some other forms of government subsidy for poor families and informal workers, could pave the way for enhancement of the expansion programmes. Those countries which have implemented the fee-for-services model should redirect their strategy to capitation, and global budget, etc.
Research into Policy and Practice
The policy stakeholders, including parliamentarians and the ministries of health, require vision, understanding and influence. Without a good understanding of what is happening in financing health care, it will not be possible for these stakeholders to develop appropriate policies and strategies to successfully implement the appropriate mix of health care financing options. Periodic summary reports showing geographical and temporal variations of the socioeconomic and health status have to be prepared. Information on the distribution and impact of public sector health inputs and of budgetary allocations could reveal crucial variations. For policy analysts and health planners, a detailed analysis of stakeholders, including political mapping is required to indicate as to whom the results of policy analysis should be addressed to. Regular updating of National Health Accounts (NHA) will provide necessary guidance for policy options and useful insights into the finances of the health sector. It would also provide appropriate interpretation and analysis to decision-makers and planners to review how they can and should allocate public resources for health, what should be
the level of public and private expenditure, and how private resources can be mobilized for public health expenditure, etc. Practical difficulties might arise in updating NHA in many countries, such as difficulty in getting the total expenditure of private sector health care institutions; estimating community financing (donations/trust funds); estimating external donor inputs in the health sector, especially when these donor agencies work directly with NGOs and communities and the need for capacity-building for national NHA teams. Health care financing is one of the key functional areas for improving health system performance. Appropriate stewardship or governance of health systems is required to achieve better health financing reform. Each country needs to review how these organizational and institutional arrangements on health financing can be improved, in order to increase as well as reallocate financial resources for health care while, at the same time, not having to overburden the poor.
Development of Social Capital
Gathering, sharing, analyzing and reporting information on health systems development could be done by agencies within and outside the ministries of health. In addition to the health planning and policy units, bureaus and departments usually established under the direct responsibility of the ministries of health, there are enough institutions and individual expertise, both in public and private institutions like national research institutes, institutes for policy studies, academic departments of universities, semi government and nongovernmental organizations, local and international research and development institutions, which could be exploited for the national cause. Many of such institutions are parasitical, not-for-profit institutions and they could be effectively utilized to gather and share intelligence and expertise. These institutions could be set up at some distance, but they should not be too dissociated, too academic and irrelevant. The ministries of health could still play a role on appropriate contract-setting, and in facilitating and overseeing the work of these institutions.
Conclusion
In conclusion, it is critical to recognize that in recommending any policies for financing the health system, no country starts from a blank slate. The appropriateness of particular strategies in any particular country will depend on its specific history, institutions, culture, politics and economic resources. The development of various types of mix of health care financing mechanisms could be judged by how well they are likely to achieve the goals of equity, better health and responsiveness, and fair financing. There is a need to have a higher level of fairly distributed prepayment schemes with appropriate strategic purchasing. The existing systems of taxation, social security institutions, and the organization of health care service providers and insurers have been developed out of historical processes and conditioned by experiences of nation-building, colonialism, labor movements, wars, communal and kinship patterns, and technological changes. Out of this, citizens have already developed their beliefs and expectations, with regard to payment mechanism. As with all social arrangements, there are ways and means to undertake reforms, but it requires inputs from social institutions and support from all stakeholders. The out-ofpocket payment, which is the major mode of financing in most countries of the Region, tends to be quite regressive and often impedes access to health care. The challenge in revenue collection is how to expand pooling mechanisms through general tax revenue and/or social health insurance contributions. The experience on implementing nation-wide mandatory health insurance schemes in low- and middle-income countries could be shared and appropriate adaptations could be made in accordance with the respective socioeconomic conditions of countries. The existing social health insurance schemes mainly covering the formal employed sector could be reviewed thoroughly and appropriate organizational and institutional reforms could be introduced in order to improve their efficiency and effectiveness. At the same time, their coverage could also be increased. Many other forms of risk-pooling schemes such as community-based or populationbased trust funds and foundations could be introduced so that the financial and health risks of the poor are adequately protected.
REFERENCES
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“.Health Insurance in India Opportunities, Challenges and Concerns” by Dileep Mavalankar, Ramesh Bhat IRDA Journal (2003): ‘Data for Health Insurance’, March “Operationalising Right to Healthcare in India” by Ravi Duggal Health insurance and Third Party Administration” by RAMESH BHAT, SUMESH K BABU ,Economic and Political Weekly July 10, 2004
Websites: ? WWW.cehat.Com ? WWW.HMO.Com ? WWW.IRDA.Com ? WWW.GENINS INDIA.Com ? WWW.TTK HEALTHCARE SERVICES.Com
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