Harvard Case Study Karnataka Yashaswini Health Insurance Scheme 1.

Background Approximately less than one sixth of India's billion people have access to affordable healthcare. For the rest, medical help is often inaccessible and beyond their means. Too often, the cost of staying alive pushes one quarter of Indians below the poverty linei and hospitalization can result in years of debt repayment, so that rural indebtedness caused by illness is frequently far greater than that caused by crop failure. The southern state of Karnataka has a significant rural population, where approximately 56% of the labor workforce is engaged in agricultural and related activities. Despite the many hospitals and medical colleges found throughout the state, the bed occupancy rate in the last few decades has been as low as 35% and a large number of people who require hospital treatment have been dying, simply because they cannot afford to seek treatment. The overarching challenge for the government of Karnataka has been to provide these disenfranchised segments of the population access to affordable healthcare in a sustainable manner. Proposals for viable solutions have focused on insurance models capable of supporting millions across India's rural areas through large networks of hospitals and clinics. Although a variety of low cost health insurance models have been initiated over the past decade, many have failed due to lack of commitment, sustainability and coverage. One such model, however the Yashaswini Health Insurance scheme has met with success and is providing a blueprint for future successes in health coverage for the poor. 2. Key Players a) Government of Karnataka, Department of Cooperation b) The Yashaswini Health Trust c) The Narayana Hrudayala Foundation 3. Choice of regulation/regulatory program The Yashaswini Health Insurance scheme, launched in 2003 by the Government of Karnataka was a landmark initiative addressing the major health concerns of rural people who typically had no health insurance. ii A form of community based health insurance, the Yashaswini scheme is based on voluntary membership that requires prepayment for health care by community members. The Yashaswini scheme was first proposed by the Hrudalaya hospital founder, Dr. Devi Shetty, while addressing the Karnataka Milk Federation (KMF). iii Shetty, a British educated cardiologist who became Mother Teresas personal cardiac surgeon and subsequently an advocate for providing modern health care to the poor, asked his hosts at the KMF to support his novel insurance idea. The resulting Yashaswini (meaning Victor) health program was then proposed to the government of Karnataka, with members of the milk cooperative as its first beneficiaries. Various philanthropists raised an initial two

billion Indian rupees for deposit into a revolving fund, and later the Karnataka government added a significant contribution. Starting operations were then conducted from the interest accruing on this revolving fund, and the scheme was soon extended to other cooperatives, in particular to the farmers cooperative in Karnataka. Yashaswini is based on the idea of an independent administrator receiving competitive bids from hospitals in exchange for the hospitals offering to set low rates for certain major operations. Many hospitals had been running at very low occupancy rates (ten percent or lower) because of the high costs of care at their facilities. The scheme also relies on the fact that it covers only surgeries and only a small fraction of farmers go in for operations. The scheme is self-funded and does not have insurance coverage from any insurance company. The Yashaswini Health Insurance Scheme covers free consultations, diagnostics at discounted rates, and covers over 1700 types of operations on the stomach, brain, gall bladder, spine, bones, kidneys and heartiv. However it is limited to a pre-set list of illnesses, and does not cover other conditions such as treatment for measles or dementia. The design of the scheme was informed by a survey indicating that farmers suffered from heart diseases, bleeding stomach ulcers, burst appendices, gallstones, enlarged prostates, cataracts, and fractures. Therefore, coverage under the scheme includes treatment for all such diseases. v Members can seek treatment at any one of 160 participating established government and private hospitals and clinics. An individual who has been a member of a cooperative society for at least six months is eligible to take part in the scheme by paying a nominal premium. Initially the individual monthly payment was 5 INR (INR 60 per person per year) while the state government contributed 2.5 INR (INR 30 a year) per member, bringing the yearly premium to 90 Indian rupees. Recently the premium was increased to 120 Indian rupees per year for every adult member and INR 60 per year for children below 18 years of age, in order to encourage family membership. The beneficiary does not have to pay for surgery if the cost of a procedure is below 100,000 Indian rupees for a single surgery and below 200,000 Indian rupees for multiple surgeries. Yashaswini operates on the principle that only 0.08% of the population typically needs surgery in any year. It was calculated that within a large group of one million individuals, a cohort of 800 would require an operation per year. Because the average cost of an operation is 10,000 INR, this would result in a total cost of eight million INR to cover the annual operations. With a premium of 90 INR per year per person, a membership in the millions would safely guarantee the availability of funds for operations, administrative costs, and testing. Essentially, Yashaswini is a group scheme where the premiums of healthy members finance the sick. Voluntary membership is prohibited in order to avoid a situation where only sick people would subscribe, consequently rendering the scheme unviable. Participation of entire cooperatives numbering in the millions of members helps disperse risk. The existence of groups such as the farmers cooperative society overcomes the problem of the poor being unable to pay premiums as a lump sum and reduces administration costs in

the collection of premiums. The farmers cooperatives collect the premiums - in most cases societies pay the annual premium for the members and deduct the amount from their transactions over the year. The amount from the societies is then deposited to the Yashaswini Trust account. These insurance fees are collected upfront for a year, providing a fund for operations. The Yashaswini Trust account is operated by an independent administrator, the Yashaswini Trust, whose duties include the task of contracting hospitals to participate in the program, selling the idea to other cooperatives and coordinating payments to hospitals after receiving competitive bids. Network hospitals obtain their fees from the Yashaswini Trust through the Family Health Plan Limited which is the implementing agency for the scheme. The Family Health Plan Limited has been designated as a third party administrator which carries out the schemes day-to-day management. The state government, for its part, has made its infrastructure of post offices available to collect the 5 INR premium, and issue a Yashaswini member card.vi A list of comprehensive packages for each operation is agreed upon by the recognized hospitals. The total package must be paid for by the Yashaswini scheme, including additional charges if the individual develops complications that require additional stay and treatment. The type of surgeries and their cost is mutually agreed upon between the hospital and the trust. 4. Results/Successes/Challenges In the first phase, over 1.6 million farmers had registered their names under the Yashaswini scheme by June 31, 2003. From July 1 to August 20, 2003, 1,473 operations had been carried out on farmers who required some form of surgical attention. vii In the second phase of the scheme, initiated in 2004, approximately 2.5 million people enrolled. At the end of the first two years, more than 85,000 farmers had received medical treatment, and as many as 25,000 farmers had undergone various kinds of operations, including those of the heart, brain, stomach, eyes and the gall bladder. viii About 86,000 free out-patient consultations had been conducted during 2003-04 and 2004-05. ix Payments of about 2.8 billion Indian rupees have been made to network hospitals as fees for cost of treatment. Many of the surgeries are conducted at the 800-bed Narayana Hrudalaya Hospital on the outskirts of Bangalore, which now reaches out to farmers through 170 hospitals across the state. By December of 2006, the Yashaswini scheme had met with so much success that the state government began plans to allow people from the Bidar district in Karnataka to undergo surgery at specialty hospitals in Hyderabad, a major city in the neighboring state of Andhra Pradesh. The costs of these surgeries would be covered under the Yashaswini scheme as the government said it would reimburse Hyderabad-based hospitals for the costs of surgery and tertiary treatmentsx. The success of the Yashaswini scheme has led to proposals for replication of such a program in other parts of India. Dr. Shetty contends the scheme can be easily replicated elsewhere, such as in Maharashtra and Tamil Nadu if the local state governments are able

to mobilize the requisite political and economic will. He is quoted as saying that all it needs is [1 million] members who have come together for some other reason other than healthcare like a cooperative society or a grameen bankand where a monthly premium of 10 to 15 Indian rupees should be collected for the whole year and deposited in the account of the charitable trust responsible for implementation of the scheme. xi As for the status of the Yashaswini scheme in Karnataka, the Narayana Hrudayalaya, hospital, which persuaded the Karnataka government to launch the scheme, says the scheme is currently in fiscal surplus.xii 5. Contacts Ms. Priti Jacob Chief Executive Officer, Micro-Health Programme Narayana Hrudayalaya Institute of Cardiac Sciences No-258/A,Bommasandra industrial Area Anekal Taluk,Bangalore-560099 Ph: 080 7835000 to 18 Email: pritijcb@yahoo.com

Business Today What will it take to ensure healthcare for all? January 15, 2006. http://www.biocon.com/biocon_press_news_detail.asp?Fileid=196, (accessed August 17, 2007). ii Demography, Health and Nutrition. Chapter 6, Department of Planning and Statistics, Government of Karnataka.Karnataka Human Development Report 2005. http://planning.kar.nic.in/khdr2005/English/Main%20Report/6chapter.pdf, (accessed August 15, 2007). iii The Tribune India Heart surgery for 5 Rupees a month. August 2, 2005. http://www.tribuneindia.com/2005/20050802/edit.htm#6, (accessed August 17, 2007) iv Government of Karnataka, Department of Planning and Statistics. Karnataka Human Development Report, 2005: Chapter 6, Demography, Health and Nutrition. http://planning.kar.nic.in/khdr2005/English/Main%20Report/6-chapter.pdf, (accessed August 15, 2007). v World Bank. Health Nutrition and Population Discussion Paper: India, Private health services for the poor, policy note, May 2005. http://siteresources.worldbank.org/HEALTHNUTRITIONANDPOPULATION/Resources/2816271095698140167/RadwanIndiaPrivateHealthFinal.pdf, (accessed August 15, 2007). vi The Tribune India Heart surgery for 5 Rupees a month. August 2, 2005. http://www.tribuneindia.com/2005/20050802/edit.htm#6, (accessed August 17, 2007). vii Times of India Trust will now run Yashaswini Scheme. August 24, 2003. http://timesofindia.indiatimes.com/articleshow/144696.cms, (accessed August 15, 2007). viii The Tribune India Heart surgery for 5 Rupees a month. August 2, 2005. http://www.tribuneindia.com/2005/20050802/edit.htm#6, (accessed August 17, 2007). ix Government of Karnataka, Department of Planning and Statistics. Karnataka Human Development Report, 2005: Chapter 6, Demography, Health and Nutrition. http://planning.kar.nic.in/khdr2005/English/Main%20Report/6-chapter.pdf, (accessed August 15, 2007). x The Hindu Yashaswini Scheme to include hospitals in Hyderabad. December 28, 2006. http://www.hindu.com/2006/12/28/stories/2006122816010300.htm, (accessed August 20, 2007). xi The Tribune India Heart surgery for 5 Rupees a month. August 2, 2005. http://www.tribuneindia.com/2005/20050802/edit.htm#6, (accessed August 17, 2007). xii Business Week Business Prophet, How C.K. Prahalad is changing the way CEOs think. January 23, 2006. http://www.narayanahospitals.com/news/Business%20Week.pdf, (accessed August 20, 2007).