HEALTH IS A HUMAN

RIGHT
ITS AFFORDABILITY & ACCEPTABILITY HAS TO BE
ASSURED FOR URBAN A/W/A RURAL, WELL TO DO
TO THE POORER SECTION OF THE SOCIETY.
 Agenda
 Healthcare and health insurance in India
• Macroeconomic trends and indices
• Current schemes and coverage
 Global experience and the objectives of health
insurance reform
 Devising an appropriate model for India
• Segmenting the market
• Framework for reform
 Managing the reform process
 Health Care scenario
• Before independence - dismal condition.
• High morbidity, mortality and Infectious
diseases.
• After independence - emphasis on PH care.
• Present Problem-
• High mortality, negligible MCH care.
• Urban-Rural divide:70:30.
• Population Size of the country.
• Declining funds to HealthCare Sector-
CG/State.
Health Care Scenario……contd
 At any given point of time 40 to 50
million of population on medication
for major sickness. About 200 million
days are lost annually.
The annual rate (range) of out-patient:
rural 30-152/1000, urban 9-81/1000
and for hospitalization: rural 16-
76/1000, urban 5-38/1000.
HEALTH CARE FINANCING IN INDIA
•The share of public financing in total health care is just
about 1% of GDP compared to 2.8% in other developing
countries.
•Beneficiaries are both poor a/ w/ a well-fed section of
society.
•Over 80% of the total health financing is private
financing,much of which is out-of-pocket payments (i.e.
User charges) and not any prepayment schemes.
 Health care spend in India is considerably
lower than that in other countries
2004 US UK Mexico Brazil China India
Life expectancy 77.4 78.3 72.6 71.4 72.5 64.0
(avg. # of years)
# of Physicians 2.7 1.9 1.7 1.2 1.7 0.4
per 1,000 people
Healthcare spend 5,365 3,036 336 236 62 32

(USD per capita)

Healthcare spend 13.2 8.4 5.5 7.5 5.0 5.3

(% of GDP)
The proportion of insurance in health care
financing in India is extremely low
Health care financing in India 2002, %
100%

83% from
private 86% from
sector out-of-
spending pocket
expenses

0%
Source of finance Means of finance
The World Health Organization has defined possible
approach to financing of health expenditure
Using central / state revenues
for health
Tax-
funded Channeling loans, grants etc.
Public Social to healthcare
security
Compulsory premium
Externally contributions to health
Total health
funded
expenditure Payments to health care providers
Out-of- for services
Private pocket
Premium contributions towards
Private health support
health ins.
Channeling donations etc. to
Externally healthcare
sourced
Social Security: Concept

• Defined as “the security that

the society furnishes to some
organizations against certain
risks to which the members of
society are exposed”
 Social Security: Advantage

The financial burden of sickness cannot be

borne by the individual. It must be
widely distributed throughout the country.
Sickness is not an individual’s misfortune but
the calamity is to taken as community & state
responsibility.
Health insurance typically helps a patient manage
health care costs beyond a threshold amount through
pooling

Patient Insurer payment

expenditure As a contingent
(INR) (from premium
pool) claim
instrument,
Stop- health insurance
Individual is an efficient
loss
payment way to help
level
individuals
Deductible Co- prepare for
insured
health care
Health care expenditure (INR)
WHAT IS HEALTH INSURANCE?
 SYSTEM OF ASSURANCE TO MAKE
CONTINGENCIES OF HEALTH CARE
EXPENSES.
 TO PROVIDE PROTECTION AGAINST
FINANCIAL LOSS BY UNFORSEEN
SICKNESS.
 TO MEET COST OF GOOD MEDICAL
CARE.
 RELIEVES ANXIETY AND TENSION.
 Origin of Health Insurance:
International
• 1883 Bismarck- sickness benefit to workers.
• 1911 Lloyd George- National Health Insurance
Scheme to cover sickness expense, medical
relief, drugs & compensation of wages lost, to
improve quality of life and improve industrial
production.
• J.F.Kimball: prepayment system of health care.
Origin of Health Insurance:
National:
1923: Workman’s compensation Act.
1948: ESI Act passed.
1952: First ESI hospital established.
Mudaliar Committee(1959-1961)
recommendations:
1.Long range health insurance policy for all.
2.Small fee for availing health services.
igin of Health Insurance…contd

• National:
• 1999: IRDA act passed.
• 2001: Insurance amendment Act:
Emphasis on TPAs.
 Forms of Insurance Available
 Indemnity Insurance: where the insurer first
pay to the hospital and claim is made. E.g.
Jeevan Asha II, Asha Deep II, Mediclaim.
 Cashless Claim Facility:TPAs who bear the
expenses on behalf of insurance company.
Patients need not to pay directly as a rule e.g.
Bajaj Alliance.
 CBHI (Community Based Health Insurance).
The key issue related to financing of health care in
India revolves around the lack of adequate
insurance . . .
• Limited coverage
• Only around 10% of the population is covered through
health financing schemes
• Geographic spread in terms of health care facilities and
financing awareness is limited
• Selection criteria by suppliers often restricts the poor
(and more likely to be ill) from affordable pre-payment
schemes
• Moral hazard and Adverse selection
• Claims ratios for Mediclaim and Jan Arogya policies
have been in the range of 120 – 130%.
The key issue related to financing of health care in India
revolves around the lack of adequate insurance … contd

• System leakages
• Provider malpractices leading to over-charging or
pre-selection / selective recommendation
• Lack of universal schemes
• Limitations in terms of coverage of illnesses as well
as treatment options
• Alternative therapies often not considered /
included under insurance
The experience of different countries suggests
that private insurance has an important role to
play in overall health care

• Source of health insurance in countries with

targeted, non-universal access to health care
coverage
e.g. Netherlands restricts public health coverage to
an income threshold
• Private health insurance has enhanced
access to timely hospital care
e.g. In UK, waiting time reduction and private health
insurance coverage have led to a virtuous cycle.
The experience of different countries suggests that
private insurance has an important role to play in
overall health care
• Private health insurance has increased service
capacity and supply by injecting financial
resources up front e.g. In the US, private
health insurance has financed hospitals in
terms of doctors and facilities through the
HMO set-up
• Private health insurance increases choice
(provider, benefits, cost-sharing) for the
individual e.g. In Australia, private health
insurance offer the option of access to spare
capacity and elective care in non-public
institutions
Global experience provides some key learning on
health insurance policy design

• Balancing risk-spreading and incentives

offered
• Balancing the need to encourage health insurance
against moral hazard (individuals choose more
care) and principal-agent problems (providers
supply more care)
• Integration of insurance and health care
provision
• Managing doctor loyalties with patient and insurer
under managed care
Global experience provides some key
learning on health insurance policy design .
. .contd

• Approach to competition and portability

• Balancing the need for consumer choice against
adverse selection (sick preferring more
generous plans)
• Focus on health as against financing of
health care
• The over-riding objective should be to improve
health rather than the financing of health care
services
Some key considerations related to formulation
of approach to HI in India . . .
• Differential approach
-Formal sector (government and non-government
workers)
• Self-employed segment
• Poor / Unemployed segment
• Scope and structure of health insurance cover
• Product and segment coverage
• Portability across service providers
• Cap on premium amounts
• Risk-adjusted approach
• Nature of fiscal incentives
• Subsidies and tax incentives for health insurance as
against health care
 As a result, the traditional model for health
insurance needs to change...

Voluntary Fixed fees

premiums Service charges
Insurer/
Mandatory
premium
Inter-
Government /
mediaries Mandatory
premium Employer
TPAs Costs up to
etc. Individual deductible Provider
Could be allied to
Financial flows insurer or be a
government
Service flows
approved provider
 … to one that allows the flexibility to serve
different segments of the population, in an
efficient manner

• Health insurance providers may need to

align themselves to overall health care
including financing, preventive health
care and health outreach in order to
grow coverage

• Regulations and policy must be

designed to encourage this
Community-based initiatives have been particularly cost- efficient in
eaching out to the poor / unemployed segments
Role in Community-based health initiative (CBHI)
Health Health Health
intermediary manager provider
Example of some SEWA / Tribhuvandas Sewagram /
CBHIs / NGOs ACCORD Foundation VHS
Nature of health risk  Inpatient,  Inpatient  Inpatient,
covered non-health Outpatient
related
Access to benefits  After
certain  Attime of  Attime of
period discharge utilization
Administrative costs  Moderate  Low  Low

Nature of pool  Occupation /  Occupation /  Geography-

formation geography- geography- based
based based
How CBHI can be made Reachable

• Effort for social mobilization &

strengthening of people organization
• Training and capacity building, special
emphasis on PRIs and Women
Organization
• Demand Driven social services, Building
of alliances and partnerships
• Advocacy for Pro poor policies.
Managing the reform process would require
several infrastructural and market changes to
be effected
• Appropriate market segmentation, awareness
initiatives, product innovation, and incentives
• Easing of entry norms for specialist health
insurance companies
• Provider rating and credentialing
• Centralized database for health insurance
experience statistics
• Efficient back-office support for underwriting
and claims processing
 Conclusion
Health insurance is an emerging important
financial tool in meeting health care needs
of the people of INDIA. CBHI is to be further
explored so that the disadvantaged section
get maximum benefit.
In India at present no Pan-India Model of HI.
All different forms need to be explored.