Prevailing chinks in health insurance sector

Sheenu Jhawar -

Resource enhancing for public sector budgetary support is generally through community financing, user charges, expansion of the role of the private sector and health insurance. Of these different approaches, save health insurance, all the others have taken off to a considerable extent.

John Akin (1987) has extensively reviewed the economic rationale for risk sharing and discusses the role of the government in providing insurance services to the people. When services are available free of charge, the need for insurance is not felt by the people. Moreover when incomes are very low, often healthcare does not receive priority. over a period of time as incomes rise the quality of free services declines and the cost of health care increases. Then the demand for insurance goes up.

While the demand for insurance is still low, regulators of insurance schemes meet with two specific problems. The first one is the tendency for individuals to overuse the services and for providers to overprovide since individuals do not directly face full responsibility for the charges they incur, except perhaps, for travel, and other indirect costs. This tends to push up costs since patients have little reason to object to additional charges.

Also an amorally hazardous situation may be created when the outcome protected against becomes less costly to the insurance participants. They may tend to be less careful and follow less health conscious lifestyles. The overprovide and overuse syndrome will also increase the need for more facilities and providers, resulting in the investment of scarce resources in certain types of medical facilities which may or may not yield the best of results for society.

The second problem is the tendency of providers to reduce service costs and hence quality, when a third party payer introduces efforts such as fixed payment rates to control inflation. The current system of insurance in India generally steers clear of cost sharing. While substantial cost sharing may reduce access to medical care, low levels of cost sharing may deter unnecessary treatment. Charging higher fees or higher co-payment for more expensive facilities will encourage consumers to get referrals and become better informed about the necessity of treatment.

It is a commonly known fact that employees are prone to avail the medical expenses benefit without actually receiving any care. Therefore permitting employees to put in claims for medical expenses does nothing to insure that the workforce is actually healthier. If you do not know where are you spending the money, you do not know if you are getting value for it. In most policy debates in India the issue of equity in the delivery of healthcare has been given precedence over that of efficiency. It may however be argued that the current system which is a mix of the different forms of insurance has not been able to achieve even this objective to a significant extent.

No healthcare system in the world is stable, and all systems would undergo considerable change in the next 10 years. The drivers of change in the developed world, are reaching the limits of the welfare state, exhausting traditional methods, and tools for containing cost, and experiencing increased consumer sophistication and demands. Change is being driven in the developing world, by, the growth of the middle class, greater demands from that middle class, and the globalisation of economies (as those countries are more exposed to what the developed world has to offer and experience greater competition and economic pressure within their own economies.)

Although every healthcare system is different they could be grouped into 4 types:

• Socialised medicine (as in Britain or Sweden) covers everybody, has a single payer, and usually has those who provide care are salaried.
• Socialised insurance (as in Australia, Canada or France) also covers everybody, and has a singl payer but pays those who provide care for a fee for each service.
• Mandatory insurance (as in Germany, Japan) again covers everybody, but has multiple sickness funds or insurance carriers and provides care through a mixture of salaried public providers and private providers - paid a fee for each service.
• Voluntary insurance (as in USA) does not offer cover to everybody, and has many payers and providers and different systems of payment and delivery.

Given the scenario of the existent health care financing, and insurance/ payment strategy, which of these suits India?

At the moment we are toying with many ideas, and several privately owned insurance agencies/ third party payers have come up, as players in the insurance sector.

The government has already been in this field for quiet sometime now, with its policies of : LIC, ESI, CGHS, and Mediclaim. However the health insurance schemes of GIC have not performed well so far for two reasons. First even those who can afford the premium, are not typically insurance conscious.

There is a general apathy towards health needs and regular checkups, and ignorance about the availability of insurance schemes, second the fact that the premium, forms a meagre 1 per cent of the total premium income, might be a further disincentive for the company itself.

Those covered by the ESI state that the scheme does not operate satisfactorily in as far as the quality of medical checkups, medicine and the doctors attention is concerned. The corporation on the other hand feels that there is a substantial amount of false certification for sickness benefits.

As for the CGHS, a study by the NCAER (1993) suggests that people used hospitals for access to specialist consultants and individuals showed up without any referrals in 83 per cent of the cases. Other problems include, long waiting periods, significant out of pocket costs for treatment and inadequate supplies of medicine and equipment.

One of the major weaknesses of ‘mediclaim’ is that it covers only hospitalisation, and domiciliary expenses, leaving out OPD care. Moreover the scheme is subject to numerous exclusions, coverage limits and restrictions on eligibility.

Also, in this scheme, initially the entire expense has to be borne by the patient, and that is no comfort at all, adding to it the fact that reimbursement is not guaranteed, and even if the patient is reimbursed, this process takes a long time.

Given the latest scenario of the potential population to be insured, and thus the sizable insurance market, lessons need to be learnt from all the past policies, both in the government and private sector, before policies for INVOLVING the population at large and APPLYING them can be considered. Also a single policy seems improbable, given the country’s vastness and diversity regarding the per capita income, the rural urban ratios, the varying cultural and social expectations from all the different sectors of society.

(The author is clinical auditor, Mid Stafford General Hospital, UK. He may be contacted at sheenujhawar@yahoo.com))