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Insights into Editorial: Making health insurance work

Insights into Editorial: Making health insurance work


A flagship National Health Protection Scheme – Ayushman Bharat to cover nearly 10 crore poor and vulnerable families providing coverage up to 5 lakh rupees per family per year for hospitalization.

Government says that the scheme is going to be the world’s largest government funded health care programme and it will provide adequate funds for its implementation.


Healthcare has become one of the largest sectors in India in terms of revenue and employment. Booming population, rising income levels, growth in infrastructure, increased awareness, insurance policies and India’s emergence as a hub of medical tourism and clinical trials have contributed to the development of health care sector in India.

As the needs of this sector are increasing, to provide up to date medical facilities is very essential. Government funded health insurance would enable poor in India to get benefited from timely care without the burden of out of pocket expenditure.

What are the major problems of Health sector in India?

After the independence the focus has been increased significantly on Health status of people. As a result there has been a significant increase in life expectancy of people from 35 years to 65 years. However, it is unevenly distributed in different parts of the country. The health problems in India are still a cause of concern.

As the income levels of the people have increased there is spurt in non-communicable or life style diseases which accounted for nearly half of the deaths.

The existing healthcare infrastructure is just not enough to meet the needs of the population. The central and state governments do offer universal healthcare services and free treatment and essential drugs at government hospitals. However, the hospitals are understaffed and under-financed. People living below poverty line continue to rely on insufficient health care facilities in rural areas.

India has one of the lowest per capita healthcare expenditures in the world. The high out-of-pocket expenses in India stem from the fact that majority of Indians do not have health insurance.

Moreover, majority of the skilled health care professionals happen to be concentrated in urban areas. This is the main reason for rural- urban disparity in terms of healthcare.

Some Major Government initiatives in Health care sector:

High Level Expert Group (HLEG) on Universal Health Coverage (UHC) has suggested an integrated health policy with multiple targets in terms of greater equity, improved health outcomes, Efficient, accountable and transparent health system, reduction of poverty, greater productivity and financial protection.

The National Health Mission (NHM) encompasses its two Sub-Missions, the National Rural Health Mission (NRHM) and the National Urban Health Mission (NUHM). The mission envisages achievement of universal access to equitable, affordable & quality health care services that are accountable and responsive to people’s needs. NRHM especially deals with vulnerable groups.

“Mission Indradhanush”, was launched to fully immunise children who are either unvaccinated or partially vaccinated.

Rashtriya Swasthiya Bima Yojana has been launched by Ministry of Labour and Employment, Government of India to provide health insurance coverage for Below Poverty Line (BPL) families.

What is the need of introducing a new health insurance scheme in Budget?

Considering the poor state of healthcare infrastructure, health insurance is a product that every Indian must acquire. A significant section of the Indian populace falls into poverty because of health ailments that necessitate high costs.

It provides protection to BPL households from financial liabilities arising out of health shocks that involve hospitalization.

Existing government insurance scheme Rashtriya Swasthya Bima Yojana (RSBY), provided limited coverage of only ₹30,000, usually for secondary care. Though it improved access to health care, it did not reduce out-of-pocket expenditure (OOPE). The new flagship scheme aimed to address these problems.

However, health care is not just a matter of health insurance, involving as it does many other elements such as the availability of a multi-layered, multi-skilled health workforce.

What is National Health Protection Scheme (NHPS)?

2018-19 Union Budget has laid foundation of the flagship scheme National Health Protection Scheme (NHPS) – Ayushman Bharat which offers various health benefits to the people. This scheme will overcome the flaws of the existing scheme RSBY.

The scheme will provide cost coverage, up to ₹5 lakh annually, to a poor family for hospitalisation in an empanelled public or private hospital.

It is expected that the scheme is set to cover more than 10 Cr poor and unsecured families under NHPS.

The beneficiaries will be able to take the treatments with in the country in private as well as government hospital and health care centres.

It would be a cashless and Aadhaar enabled scheme.

The NHPS will pay for the hospitalisation costs of its beneficiaries through ‘strategic purchasing’ from public and private hospitals.

Though implementation on this scale will be a challenge, hospitals in the affordable healthcare space will benefit.

How will it work financially?

Under the NHPS, the government pays most of the money on behalf of the poor. However, the scheme operates around the insurance principle of ‘risk pooling’. When a large number of people subscribe to an insurance scheme, only a small fraction of them will be hospitalised in any given year.

The NHPS will be financially viable, despite a high coverage offered to the few who fall sick in any year, because the rest in the large pool do not need it that year.

At present 2000 Cr allocated under NHPS scheme and it is expected to require ₹5,000-6,000 crore to get it going in the first year and ₹10,000-12,000 crore annually as it scales up.

It will draw additional resources from the Health and Education Cess and also depend on funding from States to boost the Central allocation.

The premiums are expected to be in the range of ₹1,000-1,200 per annum. Unlike RSBY, the NHPS policyholders will have a fully pre-paid smartcard that will allow for maximum deductions of Rs 5 lakh per year.

What are the execution concerns?

The major concern was expressed over putting healthcare in the hands of private healthcare providers and insurance companies when they are poorly regulated.

Universal health insurance through private hospitals has not worked for the poor earlier.

Predecessor scheme RSBY has been plagued with problems of transparency and poor service delivery. Given the low coverage private healthcare providers kept away from the scheme.

The fund allocations for RSBY remained unutilised and number of states participating dwindled, with only eight states utilising the money disbursed to them under the scheme.

Shortage of medicines, lack of infrastructure and skilled manpower such as nurses, technicians and doctors in semi-urban and rural areas will be a huge challenge in rolling out NHPS.

Experts expressed concern that the government is turning into a payer from provider.

The NHPS addresses the health concerns by sharply raising the coverage cap. But like RSBY the outpatient care is not covered which accounts for the largest fraction of Out of pocket expenditure.

What will the States do?

With respect to NHPS, there have been indications that States need to contribute to the flagship scheme as State governments have the main responsibility of health service delivery. However, it needs to be seen whether states with tight fiscal situation will be able to contribute such high expenditure.

The NHPS needs a buy-in from the States, which have to contribute 40% of the funding.

Even with the low cost coverage of the RSBY, several States opted out. Some decided to fund their own State-specific health insurance programmes, with distinctive political branding.

In a federal polity with multiple political parties sharing governance, an all-India alignment around the NHPS requires a high level of cooperative federalism, both to make the scheme viable and to ensure portability of coverage as people cross State borders.

Way Forward:

NHPS scheme involves private hospitals and insures as the major stakeholders. It is important to address the concerns of misuse by private hospitals.

This calls for a well-defined list of conditions that will be covered, adoption of standard clinical guidelines for diagnostic tests and treatments suitable for different disorders, setting and monitoring of cost and quality standards, and measuring health outcomes and cost-effectiveness.

Both Central and State health agencies will have to develop the capacity for competent purchasing of services from a diverse group of providers to avoid hospitals to undertake unnecessary tests and treatments to tap the generous coverage.

Primary health services will reduce the need for advanced care. Hence along with providing insurance coverage, there is also a need for proactively strengthening primary health services and public hospitals.