Health insurance – Ensuring health for the poor, or insuring profits for the rich??

Health insurance for India is rapidly growing into the new mantra – a neo-liberal, divisive, anti-people move that ingeniously paves the way for privatization of healthcare in the country. Private health care providers, aka the corporate healthcare industry, facilitating and facilitated by private health insurance, are rapidly and deviously bedding with ‘public health professionals’ and ‘researchers’ to systematically break down even a vestige of public health care in the country.

The planning commission’s 12th five year plan is a messy attempt to use semantics to hide the growing unwillingness of the government to provide for a dignified existence for the poor of the country, undermining every basic constitutional right to food, water, and equality. The plan also destroys the fundamental constitutional right ‘against exploitation’ because it actively facilitates exploitation BY the rich and powerful, OF the poor, voiceless and marginalized. The rich in healthcare are not merely the ‘business men’ who run companies – the rich are the politicians, the doctors, the public health professionals, the ‘charitable’ organizations, the NGOs, the research institutions, the steering and planning commissions, the investors in private hospitals and the private health insurance companies. This nexus is like a malignancy that is eating into the social consciousness of the country.

The planning commission report itself acknowledges that the general problem with any ‘fee for service’ payment system financed by an insurance mechanism is that it creates an incentive for unnecessary treatment, which in due course raises costs and premiums. But then it goes ahead to say that is not a good enough reason not to continue health insurance !!.

The Rashtriya Swasthya Bima Yojana (RSBY) was introduced in 2008 by the Government of India to provide ‘cash-less’ smart card based health insurance cover of Rs. 30000 per annum to each enrolled family comprising up to five individuals.  The beneficiary family would pay Rs. 30 per annum as registration/renewal fee. The scheme covers only hospitalization costs (OPD is not covered) and the premium payable to insurance agencies is funded by the government through ‘empanelled’ hospitals with ‘empanelled’ being the catch word.

The well known problems with health insurance are adverse selection, moral hazard, cost escalation, fraud and administrative costs.

Moral hazard refers to the way in which insurance changes people’s perspectives. It is defined as “the tendency of individuals, once insured, to behave in such a way as to increase the likelihood or size of the risk against which they have insured.” For example, knowing that he / she is insured, a person may indulge in more risky behaviour (e.g. smoking, fatty diet etc) or may use more health services. This is called consumer moral hazard or demand side moral hazard. On the other hand, knowing that a third party is paying the medical bills, providers may alter their treatment patterns for insured patients. This is called supplier moral hazard. This is especially so if the provider is paid on a fee-for-service basis. Moral hazard is a problem both for financial viability and for public health logic, as it results in cost escalation, excessive medical treatments and even iatrogenesis.

Fraud is the second big problem with health insurance, especially in India where the provider is totally unregulated. There are two types of fraud. The first is those committed by the insured. This may be in the form of producing false or inflated bills and claiming for treatment that never occurred or cost much less. However, the most important fraud is usually committed by the hospitals. They may do unnecessary investigations or provide irrelevant treatment or inflate the bill in case of an insured patient.

Health insurance, with its third party payment provides an incentive for cost escalation. This is especially so, if the market is unregulated and the providers are paid on a fee-for-service basis. This is now recognised as a major problem in most Organisation for Economic Co-operation and Development (OECD) countries and is likely to be even more problematic in developing countries.

There are substantial administrative costs associated with marketing, processing claims and countering frauds. These are known as loading costs. The administrative costs and cost escalation can raise government spending on health several fold without actually improving quality of services.

Most of the proponents of HI fail to take into consideration how the inter-relationship in India works when they freely  quote examples from different countries.

On the one hand is an ill informed poor, disempowered marginalized community that, apart from poor health, also has poor access to water, education, food and human rights. When one of this community falls ill, they are expected to make a choice between the private and public provider. The choice is not an informed one. Whereas a patient can see the obvious dysfunction of a public services, it would be inhuman and unethical to expect them to be discerning when it comes to unnecessary procedures and treatments. How would a patient know when the doctor recommends a surgery when the patient doesn’t really need one?

Doctors in India score less than acceptably in the basic ethics and principles department. It is impossible to expect the majority of them to be driven by anything other than the profit motive. This is an important confounding factor when expecting a poor and vulnerable patient to seek services from the private provider. Health insurance only becomes a channel that takes away peoples choices because it offers them services at the nearest private provider

Sustainability is a huge concern with health insurance schemes. Middle and low income countries with social insurance mechanisms such as Brazil and Thailand have found that the objective of universal access has not been met, and are therefore moving away to direct tax based financing of service provision. The US has also had experience of private insurance with targeted publicly funded social insurance and private provisioning driving up costs of care, creating moral hazard and being exclusionary.

Although proponents of health insurance agree that it is not as progressive as tax based financing, they still do not want to demand tax based financing as a way forward. They explicitly state that tax based financing is a better form of financing but still give no reason for why that should not be the way of funding healthcare. . Health insurance gurus have already internalized the neo-liberal philosophy that public systems don’t work. They have made the decision and are quite incapable of revisiting that debate. They do not see the strengthening of public services as a goal. They are happy to quote examples of ill-functioning public services. They rather close all public provision of care because their argument is ready and to the pat – public services are no good. They will not accept that the same instruments that they are pushing to provide health insurance are the ones that did not strengthen the public services. If the instruments can be strengthened (in theory) to deliver health insurance why can they not be strengthened to provide public services?

The proponents of health insurance state that because it is contributory in nature, people can be allowed to express their concerns to the health services. They go on to say that ‘unlike user fees, when the interaction between the patient and the health service is on an individual basis, in health insurance there can be collective negotiation’. This is some kind of wishful thinking. As can be seen with the many reports of RSBY, the community itself is tottering on the brink of illiteracy and poverty that have been nurtured by structural hegemony. The expectation that this group will come together and express their concern to the health services is naïve and regressive. Instead the community should be empowered to demand all kinds of right – whether health, education, nutrition or water rather than some form of package that a health insurance company decides based on its income generation graph.

Health insurance in India is based on the premise of divide and rule, where people are arbitrarily classified as Below poverty line (BPL) and above poverty line (APL)!!. There is no consideration that an APL could convert to a BPL at any point in time and that BPL is not only about what materials and money one possesses but also one’s ability based on one’s social and emotional hierarchy, to be able to use/utilize those possessions. If a widow is a single breadwinner with some assets from her parents, she could be classified as APL. However, in an emergency that involves her or the kids, she may not have a social position to use these assets or use any of the resources that classifies her as APL.

The proponents of HI again make huge assumptions that there is a guarantee of service in health insurance. There is absolutely no evidence to prove this.

A health insurance manual for India states that when there is a well functioning public service delivery, there is no role for health insurance. However it then goes on to push for health insurance rather than a well functioning public system. This is a paradox of policy making!

Evidence from many states in India with regard to the RSBY and other state sponsored populist health insurance schemes shows that more private hospitals are empanelled compared to public hospitals (eg Arogyashree has 80% private hospitals empanelled). Interestingly, but completely unsurprisingly (bingo!!!) there are fewer private players in rural, tribal and remote areas The evidence also shows that the private sector is providing a narrow and selective range of services, cherry-picking profitable procedures (with hysterectomies being preferred over Caesarian sections) and treating simple and uncomplicated conditions while referring the rest to the public healthcare. Diseases of public health importance such as malaria and tuberculosis do not figure on the list of interests of the private players as they are least profitable. Predictably, these diseases are not treated at the private hospitals.

Complicated cases that need to stay longer are shifted to public hospitals as they ‘don’t fit into the package’.  A study comparing RSBY in private and public hospitals have found that private hospitals have an increased caseload and income whereas public hospitals have shown a decline in patients, decline in the range of functions and withdrawal of previous maintenance funds on the assumption that income has been generated through RSBY. Public hospitals have been forced to show utilization through corrupt practices, irrational hospitalization and prescriptions. Conditions treatable at primary level are transferred to secondary and tertiary level leading to a distorted pyramid. Patients needing long term hospitalization (eg burns) are not provided treatment.

Most reports about the RSBY indicate that there has been a substantial transfer of patients, particularly for some procedures, into the private system and away from the public sector. What is most worrying about this trend is that under RSBY, care is only provided for certain disease groups, often those that are more convenient and profitable for private providers. Simultaneously there is considerable denial of care in cases where provision proves inconvenient for private providers. It appears that “demand” is being actively shaped by the treatments that private healthcare providers want to supply rather than by the health needs of the insured population. (JSA position paper 2012)

There is a strong likelihood therefore that the money invested in RSBY will create – and is already creating – a new, market-oriented health system based on providers’ profitability rather than covering existing needs and the actual catastrophic health expenditures of the poor across the country.

Schemes such as RSBY, Arogyashree, Kalaignar scheme etc. provide only hospitalization coverage.  Almost 50% of total public spending in AP and TN goes to tertiary care. Networked hospital distribution of private providers is 68% for RSBY, 100% for CGHS, 58% for ESI, 95% for Vajpayee (Karnataka), 97% for Kalaignar and 94% for Yeshaswini.

The Planning Commission’s own draft begins by stating that there is a well-established problem with any “fee for service” payment system financed by an insurance mechanism because it provides incentives for unnecessary treatment, leading to spiralling costs and premiums. The evidence, in the case of RSBY too, they admit points to this process and therefore needs to be very thoroughly studied before there is further expansion. Yet, a few paragraphs later, the Planning Commission’s draft calls for massive expansion of the current RSBY scheme across the country, even as several reports regarding its performance thus far raise serious concerns!

Instead of subjecting the RSBY to the strongest, independent evaluation possible, however, the Planning Commission is pushing for its unqualified expansion as a necessary “interim measure,” using it as a model for private sector engagement in healthcare provision, and encouraging the spread of other, equally unevaluated approaches to Public-Private Partnerships as an essential plank of the Twelfth Plan Health Strategy. (JSA position paper 2012)

International and local investors in private healthcare and insurance have formed cosy alliances with ‘researchers’ and ‘academicians’ who publish predetermined research outcomes in journals that have already been bought out. Governments are being bombarded by ‘civil society ‘ representatives who could technically be any ‘Tom, Dick or Harry’ or to give it a local flavor, any “Nandraj, Veda or Ramachandra”  using this self serving ‘evidence’ base to push for vested interests.

In the meantime, the people are bombarded with a variety of cards, schemes and propaganda that only gets them added mental trauma apart from all the ill-health that they have no real means of seeking services for.

While we welcome the recent upsurge of interest in the concept of universal health coverage, we oppose the idea that this be achieved through the promotion of a minimalistic insurance model that would operate within a marketized system of health care, or worse still, be used as a context or excuse to dismantle or undermine public hospitals and promote corporate interests in health care delivery. Universal health coverage must be achieved through organized and accountable systems of high quality public provision.” International People’s Health Assembly, Cape town, July 2012








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