Insurance is only one of several options that can be chosen to finance the proposed National Health Protection Scheme (NHPS) that was announced in the 1 February Budget speech for the fiscal year starting 1 April.
In an article posted on the Brookings Institution's website, Ms Shamika Ravi, member of the Prime Minister's Economic Advisory Council and director of research at Brookings India, argues that the Budget allocation for the scheme is enough and that India needs to find new innovative ways of providing adequate accessible healthcare to all.
The central government has allocated INR20 billion (US$310 million) in the Budget for the scheme. The government plans to provide health cover of INR500,000 per family to 100 million families in India, which is about 500 million people or 40% of the population.
While the broad outlines of the scheme are known, the details are being worked out in discussions with state health secretaries, which will involve questions about how the centre and states will split financing the scheme in a 60:40 ratio, and how the national insurance scheme will fit in with the existing Rashtriya Swasthya Bima Yojana (or RSBY which targets those below the poverty line) and state level schemes in states like Kerala, Karnataka and Andhra Pradesh.
Ms Ravi says that India needs to consider new financing methods, like perhaps a medical saving health scheme or public provisioning of services because there is a large public health sector also that needs to be revived.
She said: “I think we have to think of a Singapore-type model where people actually put aside savings for health, and the equity aspect is there in that the government pays for health needs of people below a certain income level. It is a better way of financing health because, in insurance, there are such huge asymmetries in information that neither the healthcare providers nor the patient has any incentive to lower cost or lower utilisation. If you are insured, you will be given all diagnostic tests and probably be over-diagnosed.”
Ms Ravi said: “But we also need to look at the utilisation of health insurance in this market segment. The claim-to-coverage ratio is much lower in the poorest two income quintiles compared to the average health insurance market. So you also need education and financial literacy and whatever else is required for people to start using health insurance.
“When the government is paying the premium, the claims-to-coverage will be taken into account while negotiating the premium with insurance agencies. To make it actuarially fair, you have to factor in that claims to coverage are low while setting the premium. If the claims to coverage increases – which it should ideally because people do fall sick, especially among the poor – then the government can adjust the premium with increased utilisation.”