Interview: ‘Insurance should not be the only financing model for public healthcare in India’

The most-debated question about the National Health Protection Scheme that Finance Minister Arun Jaitley announced in the Budget has been about how the government intends to finance the ambitious programme. The government plans to provide health cover of Rs 5 lakh per family to 10 crore families in India, which is about 50 million people or 40% of the population.

Many observers believe that the allocations made in the budget are far from adequate. However, Shamika Ravi, member of the Prime Minister’s Economic Advisory Council and director of research at Brookings India, argues that the allocation is enough with the view that insurance should not be the only method of health financing but that India needs to find new innovative ways of providing adequate accessible healthcare to all.

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, how states will be implementing agencies in the scheme and how the national insurance scheme will fit in with the existing Rashtriya Swasthya Bima Yojana or RSBY and state level schemes in states like Kerala, Karnataka and Andhra Pradesh.

The National Health Protection Scheme is one of two features of the Ayushman Bharat programme. The other is the establishment of health and wellness centres that will essentially be upgraded primary health centres and sub-centres. for which the government has allocated Rs 1,200 crores for the coming financial year. Yet, even with the talk about strengthening health at the grassroots, overall allocation to the department of health and family welfare rose by a meagre Rs 1,250 crore from the revised Budget estimate for 2017-2018 and allocations to the National Health Mission has fallen by more than Rs 600 crore.

Ravi spoke to Scroll.in on health financing and the bigger question of investing in making healthcare accessible across India. Here are edited excerpts of the interview.

What is the thinking behind this model of health financing?
Many states have some form of public health insurance. The southern states – Andhra, Tamil Nadu, Karnataka – have their own schemes, which have now been running for over 10 years. They have experimented with what the cover is going to be, criteria for hospital empanelment, IT solutions to detect fraud, what the premium is and so on.

From 2008, we rolled out the national health insurance scheme – the RSBY – that was adopted by most states that did not have their own health insurance schemes. In places like Karnataka, it evolved into some kind of combination of the state scheme and RSBY, which is good because it is in the spirit of fiscal federalism.

Given this background, the announcement of the National Health Protection Scheme was fairly significant because the coverage and beneficiaries base has been expanded. It provides cover to 50 crore people that is 40% of the population. Given that the poverty level is at about 25%, this scheme will also cover people above the poverty line but still in the second income quintile. The reason this is important is because India has 7% impoverishment exclusively due to healthcare expenses. This has not improved in the last 10 years despite growth and whatever else we have done in health policy.

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.

People criticised the announcement saying that the amount of money pledged to the scheme wasn’t much, but I think it is a reasonable outlay right now. The capacity to use capital within states is not there right now within the health sector.

Is this the right way to go about financing healthcare?
No, health insurance should not be the only financing model for public healthcare in India, which is why I am glad that we have not done this blockbuster announcement and pledged all the funds. We need to evolve these schemes into something else, like perhaps a medical saving health scheme or public provisioning of services, because there is a large public health sector also that we need to revive. If you put all your money into health insurance, it will be very difficult to put money into these other things. Funds for health itself are competing with whatever other demands there are on the government.

Within the health budget, I would rather that only that much money is given to the NHPS as the states have the capacity to absorb right now. Secondly, it should not be so large that we cannot evolve and adapt new financing methods. We need to experiment with financing models.

The NHPS is good in that it is one mode of financing and frankly insurance is probably the easiest to fund. 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 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 overdiagnosed. The US, which has an insurance funded health system, spends 18% of its GDP on healthcare, while Singapore spends 4% and they have very similar comparable health outcomes.

Right now, are we thinking of any other innovative ways of financing health?
We are. There are several discussions on but they are at a stage when it is too early to announce these things.

Is this kind of large insurance coverage for 10 crore families sustainable? We have seen from the Aarogyasri scheme in Andhra Pradesh that public health insurance has placed a huge burden on the state exchequer – so much so that the state has asked the centre to provide financial support.
There are several lessons to be learnt from Aarogyasri. It was meant for the poor but in around 2009, the government said that 80% of people in Andhra Pradesh had Aarogyasri cards. They don’t have a poverty line of 80%, which meant that it was fraudulent in terms of the number of people who were availing of Aarogyasri. Now, with all the digitisation and linking with Aadhaar, it becomes easier to stick to that number of 50 crore people that we want to target. There are tools with the government to make implementation more efficient that will keep the costs down.

Andhra has learnt through its mistakes and I don’t think that at an all-India level we will necessarily be repeating those. Under NHPS, we cannot go from covering 40% of the population, which is the target, to something like 80%, like under Aarogyasri. Empanelled hospitals will have to be monitored and audited regularly.

Are we then still talking about NHPS as a step towards universal health coverage? It seems, from what you are saying, that this model might work for the 40% that covers below poverty line families and the segment above but not for universal health coverage.
I don’t think a country like India can move to universal health coverage overnight. If we did have universal health coverage then we would be able to afford a very minimal amount of service. We are now going about it in a way where we can offer significant coverage to 40% of the population.

Universal health coverage is not just about financing but also about access to quality care, which is where the second part of Ayushman Bharat comes in with the Health and Wellness Centres – which, frankly, I think, is the bigger announcement and not getting adequate coverage. Eventually, it is well-run wellness centres that are going to bring down costs of healthcare across the country because they will perform the function of gatekeeping. People are not going to go to super speciality hospitals for colds and coughs. These are things that a nurse or ANM should be able to attend to within three km of where people live.

Right now, we do have these facilities in primary health centres and the idea is to see whether we can put down additional resources to make them good quality centres. This is the problem of the first order for access to quality care.

We have had a problem with human resources at primary health centres and sub-centres. Is there a plan to fix this with the revamped health and wellness centres? Is there an idea of what portion of what has been allocated to health and wellness centres will go towards human resources and what will go to infrastructure, IT etc?
Those details are being worked out right now. There was a pledge last year to double the health budget and the roadmap towards that has to be on an annual basis. You cannot have a doubling all at when when the targeted time of four or five years are up. The roadmap leading to the doubling the budget involves exactly these kind of exercises, like what kind of funding will go to what aspect of the wellness centre. We are doing a lot of investment gap analysis, for instance. I think for healthcare in India, human resources is a much more binding constraint than capital. This is not just for the public sector but also for the private sector. The WHO has certain benchmarks by which standards we have half the number of doctors and nurses required overall. Solving that is not a financial or capital issue. Then you go back to the National Medical College bill, which has to be cleared fast so that we can clean up medical colleges and regulate them in such a way that we can have more well-trained doctors and nurses.

How is the 60:40 model going to be worked out? Is the 60:40 distribution for the contribution towards premium or also for administrative and other costs under the NHPS?
Those details are being worked out in deliberations with state health secretaries. Different states have different health insurance schemes and some don’t and they only rely on RSBY. For the states that already have schemes, the NHPS becomes the minimum guaranteed financial service available for everybody in that 40% bracket and then the state scheme will top up. If they have the capacity to absorb funds and raise coverage, so be it.

Will the NHPS help significantly with health insurance portability, where people from one state can get insurance in another, considering we have so many people across India moving across states to find work and jobs?
Absolutely. The thing about healthcare is that 75% of all health infrastructure is urban. So people migrate a great deal for health needs. When that happens, portability has to be a natural feature of national policy.

When we are trying to cover below poverty line families and the segment above, we might encounter a data problem, given that there have been several questions raised as to the quality of Socio-Economic and Caste Census data. How do we decide who is going to be eligible under the scheme?
The caste census has a fairly rich data set and the idea is that it will be used for targeting. Obviously, Aadhaar will have a fundamental role to play in this as with all government schemes because the state really does want to minimise distortions and inefficiencies.

I have a feeling they will have to use the census data along with the RSBY data, because the RSBY has been around for 10 years. The census happens every 10 years. So while we may begin with this we will need something that is more frequent and recurring to really make the basis for targeting.