Regulating Regressive Health Insurance in India

Health Care Comments Off

With 76% of India’s population lacking health insurance, J.P. Nadda, Union Health Minister, said that in May 2016 only around 24% of India’s population has some form of medical insurance, taking into account both private and public insurance schemes, and RSBY.

20 Central and State sponsored insurance schemes existed in 2015, and the IRDA estimates 28.8 crore Indians were insured as of 2014-15.

Government policy has perhaps created fragmented penetration, not moving towards pooling financial resources for risk projection across social segments. If the base of such pools can be widened and merged it could help reduce classic insurance failures.

Insurance in India only covers catastrophic expenditure (e.g. cost of restricted hospital treatments) offered free, without external audits or regulation of quality. Outpatient treatment and medication is largely not covered.

Commercial insurance has experienced two major problems – 1) only those who need care are more likely to insure themselves (adverse selection) leading to a reduction in pool size, and 2) patients and hospitals build up claims without concern for cost (moral hazard) – attempts to regulate hospitals would lead to cost cutting responses that could increase patient harm.

Data from the NSS 2014 (71st round) shows that there has been a steady increase in the cost of care. WHO estimates 62.42% out of pocket spending in India as a percentage of overall health expenditure.

Notably, even 42% of beneficiaries under the Central Government Health Scheme (CGHS) paid out of pocket expenses, adding up to about 30% of their overall annual health expenditure.

Major changes in insurance policy are merited in coming days to improve the healthcare outlay of India.