Dr.

Padma Bhatia
Assistant Professor
Department Of
Community Medicine
G.M.C., Bhopal. M.P.
India.
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 Scenariocontd
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.

2004 US UK Mexico Brazil China India
Life expectancy
(avg. # of years)
77.4 78.3 72.6 71.4 72.5 64.0
# of Physicians
per 1,000 people
2.7 1.9 1.7 1.2 1.7 0.4
Healthcare spend
(USD per capita)
5,365 3,036 336 236 62 32
Healthcare spend
(% of GDP)
13.2 8.4 5.5 7.5 5.0 5.3
Health care spend in India is considerably
lower than that in other countries
The proportion of insurance in health care
financing in India is extremely low
0%
100%
Source of finance Means of finance
86% from
out-of-
pocket
expenses
83% from
private
sector
spending
Health care financing in India 2002, %
The World Health Organization has defined
possible approach to financing of health
expenditure


Total health
expenditure
Public
Private
Social
security
Externally
funded
Tax-
funded
Private
health ins.
Externally
sourced
Out-of-
pocket
Using central / state revenues
for health


Compulsory premium
contributions to health
Channeling loans, grants etc.
to healthcare
Payments to health care providers
for services
Premium contributions towards
health support
Channeling donations etc. to
healthcare
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 individuals
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

As a contingent
claim
instrument,
health insurance
is an efficient
way to help
individuals
prepare for
health care


Insurer payment
(from premium
pool)
Individual
payment
Deductible
Co-
insured
Health care expenditure (INR)
Patient
expenditure
(INR)
Stop-
loss
level
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: Workmans 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.

Origin of Health Insurancecontd
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...
Individual
Insurer/
Provider
Government /
Employer
Fixed fees
Service charges
Voluntary
premiums
Mandatory
premium
Mandatory
premium
Costs up to
deductible
Could be allied to
insurer or be a
government
approved provider
Inter-
mediaries
TPAs
etc.
Financial flows
Service flows
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 reaching out to the poor / unemployed segments
Role in Community-based health initiative (CBHI)
Health
intermediary
Health
manager
Health
provider
Example of some
CBHIs / NGOs
SEWA /
ACCORD
Tribhuvandas
Foundation
Sewagram /
VHS
Nature of health risk
covered
Inpatient,
non-health
related
Inpatient Inpatient,
Outpatient
Access to benefits After certain
period
At time of
discharge
At time of
utilization
Administrative costs Moderate Low Low
Nature of pool
formation
Occupation /
geography-
based
Occupation /
geography-
based
Geography-
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.