Market Economics

Healthcare Insurance in India: A Few Concerns

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ACRA Article No. 3, Oct. 2018

By Dripto Mukhopadhyay

The Union Government’s budget speech of 2018-19 announced two major initiatives as part of ‘‘Ayushman Bharat’’ programme.  Government’s aim was to create interventions to address health issues holistically, covering both prevention and health promotion. The National Health Policy, 2017 envisioned 1.5 lakh health and wellbeing centres to bring health care system closer to locations where people live. A budget of 1200 crore was allocated for this flagship programme. Admitting that lakhs of families in India borrow or sell assets to receive indoor treatments at hospitals, the finance minister stated that the “Government is seriously concerned about such impoverishment of poor and vulnerable families. Present Rashtriya Swasthya Bima Yojana (RSBY) provide annual coverage of only `30,000 poor families. Several State Governments have also implemented/supplemented health protection schemes providing varying coverage. My Government has now decided to take health protection to more aspirational level. We will launch a flagship National Health Protection Scheme to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalization.”[1] Apparently, if implemented, this will be the world’s largest government funded health care programme. with this background, this article attempts to provide an assessment of current situation regarding Indian health insurance market and likely implications of externalities that are required to make intensions of the government, as expressed during budget speech, a success.

[1] https://www.indiabudget.gov.in/ub2018-19/bs/bs.pdf

Slide1

Slide2

Above figures suggest one key aspect clearly. Though the Governments, both Central and State, always claim health to be a critical component of planning, reality is far from it. As Figure 1 suggests, public health expenditure as percentage of GDP was far below many other countries of the world. More importantly, even with scanty fund available for healthcare sector development, total funds remained unspent were significantly high. Except last couple of years, % of funds unspent was nearly 20% of the total fund. This puts a question on the authorities about their true intention of developing healthcare in the country, which is perhaps the most important development parameter. It is obvious that while the basic healthcare facilities are given less important compared to many other sectors, health insurance would hardly figure in governments’ agenda, at least in reality. Let’s look at the current health insurance sector.

Health insurance sector in India

To understand the current scenario and possibilities in of health insurance sector in India it is pertinent to understand types of health expense coverage Indian population do avail at present. In India 28.7% households do have privilege to avail any kind of health coverage. If we look at the same from rural and urban status of residence, these are 28.9% and 28.2% respectively. As evident from Fig 3, among the households covered under any health scheme, about 93% in rural areas and 80% in urban areas are covered by Government schemes. State health insurance scheme and Rashtriya Swastha Bima Yojana (RSBY) are the two government schemes that provide maximum coverage to both urban and rural areas. Health insurances purchased from private companies (by households) are as low as 8.5% and 1.8% in urban and rural areas respectively of the households covered under any health scheme.

Slide3

Equally skewed distribution is observed in relation to wealth index. The NFHS latest survey shows that except the topmost quartile of wealth group, for rest of the quartiles state health insurance scheme and RSBY are the most important ones and cover about 95% of the households have any kind of health coverage. As expected, households covered under health insurance by private service providers is significantly high for topmost wealth quartile.      Slide4

Apart from rural urban and wealth distribution, financial coverage of households for healthcare is extremely skewed across states in India. While the per cent of households with at least one member covered under any health scheme or insurance is as high as 75% in Andhra Pradesh, the same is as low as about 4% in Manipur. Significant regional disparity can be noticed. Even more importantly, intra region disparity is also quite sharp. All Southern states are much ahead of the other regions of the country. However, in Karnataka this percentage is marginally lower than India average. While most of the North-Eastern states record a coverage above national average, in Assam, Nagaland and Manipur this percentage is less than 10. All the Western states are below India average. The same is true for Northern region also. Surprise inclusion among the top states is Chhattisgarh which is ranked 2nd with a high 68.5%.       

Slide5Source: Survey (NFHS-4) National Family Health Survey (NFHS-4), 2015-16, International Institute for Population Sciences, Mumbai, Dec 2017.

It is heartening to see that in some of the state at least one member of significantly high proportion of households is covered under any sort of healthcare coverage. However, for healthcare its critical to understand whether the covered people are delivered quality services. Healthcare coverage without quality services is as good as no health cover. As shown in Fig 3 and Fig 4, out of 28.7% households where at least one member is covered by any type of health scheme or insurance, more than 95% are covered by either state government or central government schemes. Therefore, the financial assistance for treatment will be available in government facilities only. Therefore, it is important that people do have access and confidence on government facilities to avail financial assistance in case of health problem. To understand the same, the following table is presented. The table shows that in most of the states more than 50% of the people do not use government facilities because of different reasons. Two major reasons are long waiting time and poor quality of treatment. It is well understood that in case of any serious illness, immediate treatment and quality treatment are must. Therefore, it is quite unlikely that people will be able to avail current government facilities so that they are eligible to avail the financial assistance for healthcare coverage. The latest NSSO report (2014) suggests that 68% of the urban population and 58% of rural population go to private hospitals for their treatment.[1]

 

Table 1: Usage of Government Facilities

 State
Reasons for not using government facilities
% of households that do not generally use government facilities
No nearby facility
Facility timing not convenient
Health personnel often absent
Waiting time too long
Poor quality of care
India
55.1
44.6
26.4
14.8
40.9
48.1
Delhi
42.5
44.4
33.4
13.3
67.1
34.1
Haryana
60.9
47.4
33.3
23.3
59.1
53.8
Himachal Pradesh
19.3
40.5
29.6
16.1
44.9
44.4
Jammu & Kashmir
19.7
39.4
21.6
13.8
48.5
46.9
Punjab
72.9
41.9
26.4
17.1
66.3
57.5
Rajasthan
34.6
37.6
23.7
13.7
39.9
57
Uttarakhand
50.5
41
31.1
18.1
47.9
47.1
Chhattisgarh
49.5
49.8
20
13.3
31.1
50.2
Madhya Pradesh
59.6
44.7
28.4
18
40.6
48.3
Uttar Pradesh
80.1
47.7
16.9
11.5
35.7
61.1
Bihar
77.6
42.6
33.8
17.8
38.6
59.6
Jharkhand
71.7
59.7
24.3
15.8
33.9
45.9
Odisha
11.3
48.4
13.9
8.7
23.1
34.6
West Bengal
44.7
49.6
22.2
10.2
46.5
35
Arunachal Pradesh
12.3
50.5
18.8
11.6
30.3
32.6
Assam
20.7
46.9
23.6
10.2
34.6
30.1
Manipur
23.2
16.5
38.7
14.5
54.9
60.8
Meghalaya
23.6
30.8
19.6
11.2
43.5
33.5
Mizoram
14.6
31.1
10.7
3.3
34.1
30.4
Nagaland
40.7
35.4
24.4
17.5
26.1
39.7
Sikkim
10.2
22.9
38.7
31.1
65.8
53.8
Tripura
9
15.1
14.9
6.1
54.9
34.9
Goa
45.6
20.7
34.9
15.3
67.7
24.3
Gujarat
57.2
38.1
23.9
10.6
39.6
34.7
Maharashtra
63.7
45.7
24.5
12.1
40.9
36.4
Andhra Pradesh
64
36.5
34.6
17.8
37.2
50.5
Karnataka
48.7
49.6
39.3
26.8
44.6
40.1
Kerala
32.5
37.7
28.8
11.4
47.1
25.5
Tamil
36.7
35
33.7
15.4
46.2
37.2
Telangana
70.7
46.1
30.6
17.3
35
50
Source: Survey (NFHS-4) National Family Health Survey (NFHS-4), 2015-16, International Institute for Population Sciences, Mumbai, Dec 2017.

The NSSO report also shows that on an average the treatment cost in case of hospitalization is Rs. 18268. In case of rural and urban these are Rs. 14935 and Rs. 24436 respectively. The following chart (Fig 6) presents the expense scenario of treatment in Public and Private hospitals. In both rural and urban areas, the average costs in private hospitals are more than 4 times than that of government hospitals. Since the large number of households cannot avail treatment in public hospitals due to various reasons, they need to opt for private hospitals under compulsions. Therefore, not only a large number of people need to incur 4 times higher treatment cost, but also devoid of any financial assistance as that can be available in case of the treatment done in government hospitals. As obvious, the expense is met either from their savings or through borrowings. With more than 60% households below income group Rs. 1.5 lakhs per annum, the average expenditure itself is about 20% of annual income. However, in many of the cases this may go beyond annual income of these poor households, especially if the treatment is done in private hospitals.

[1] Health in India, NSSO Report No. 574, 71st Round, January to June 2014.

 Slide6Source: Health in India, NSSO Report No. 574, 71st Round, January to June 2014.

Key points emerge from the analysis

A few emerge from this analysis are:

  • Even with extremely low public expenditure on healthcare facilities, significant amount of fund available goes unspent
  • Only 28.7% of the households are covered under any scheme of health scheme or insurances, where at least one member of the household is covered (according to NFHS report). However, according to NSSO report this is even lower.
  • In both rural and urban areas majority of these households are covered by either state government or by central government schemes.
  • According to wealth index, except the top quartile, for the rest government schemes are the only major source of any healthcare coverage.
  • Significant discrepancies are noted across states in terms of healthcare financial coverage. Southern states are much ahead when the coverage is compared.
  • However, across states large number majority of the households do not opt for government hospitals due to poor treatment quality and waiting as major reasons.
  • The average expenditures in private hospitals is about 4 times than that of the government hospitals in both rural as well as urban areas. People do spend such exorbitant costs under compulsion.

A few concerns for future 

With the finance minister’s announcement of Ayushman Bharat and bringing 10 crore poor households in the net of health insurance, a few questions arises:

  • Whatever small fund is available for health and family welfare, larger chunk is allocated for family wellbeing than creating healthcare infrastructure. According India Health Statistics 2017, as of March 2017 in many of the states there is not even a single district hospital in every district.
  • It is also well known that existence of healthcare facilities is disproportionately biased towards urban areas. The rural areas are majorly devoid of any good healthcare facilities.
  • Though every year a large number of students passing out from government and private medical colleges, most of them are unwilling to serve the rural areas. The prime reason is lack of basic facilities in these areas that doctor require.
  • With this situation, and already more than 95% of the covered households are covered under government schemes only, an addition of 10 crore household to this base will make it more or less 100% under government schemes. Where will they be treated?
  • Unless the public healthcare facilities are increased in number and improve in their quality of treatment and other relevant facilities, the situation will remain the same

 

References:

 

 

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