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  1. National Health Protection Scheme: Why insurance can’t replace primary healthcare

National Health Protection Scheme: Why insurance can’t replace primary healthcare

What’s in a name?”, asked a plaintive Romeo Montague, as he sought to woo Juliet of the Capulets. That question could be repeated as the Rashtriya Swasthya Bima Yojana (RSBY) changed name to the National Health Protection Scheme (NHPS).

By: | Published: February 9, 2018 5:10 AM
v narayansamy, v narayansamy on national health protection scheme, National Health Protection, what is National Health Protection A Trust is more likely to be in line with the governmental intent to deliver public good with public money. It is established by and accountable to the government. (Reuters)

What’s in a name?”, asked a plaintive Romeo Montague, as he sought to woo Juliet of the Capulets. That question could be repeated as the Rashtriya Swasthya Bima Yojana (RSBY) changed name to the National Health Protection Scheme (NHPS). The pedantic may question, “why call it an insurance programme when it is a free financial cover provided to a section of the people from tax revenues?”. Those less bothered by labels but worried about implementation and impact will demand to know how the scheme will be delivered with efficiency, equity and economic prudence. The RSBY offered a modest coverage of `30,000 per family per annum, with a yearly enrolment fee of `30. The bulk of the premium was paid by the government. The NHPS offers coverage up to `500,000 per family, without any subscription fee. The premiums are entirely paid by the government, from tax revenues. The scheme does not, therefore, resemble classical insurance programmes, where premiums are paid by individuals from their family income or by their employers from organisational budgets.

However, the scheme does operate on the principle of “risk pooling”, which is the cardinal feature of insurance programmes. When a large number of people are enrolled in a scheme (irrespective of who pays the premium), the healthy cross-subsidise the sick. Since healthy people outnumber the sick, at any given period, the high costs of healthcare incurred by the sick will be compensated by the low or no expense incurred by the healthy. If healthcare is provided to the whole population from tax revenues, it will constitute the largest risk pool. Within a system of progressive taxation, the rich cross-subsidise the poor, even as the healthy cross-subsidise the sick. Even an insurance system can potentially have differential premiums based on family or personal income levels, with the rich paying more. If the NHPS is extended to non-poor population segments above 10 crore families currently proposed as beneficiaries, they could buy into the scheme by paying income-graded premiums. Similarly, employer-paid health insurance programmes could merge with the NHPS. The scheme can then become “universal”.

The other place “insurance” intrudes into a tax-financed scheme like the NHPS is in the administration of the programme. The government may choose to do it through a Trust set up by it or hand it over to an insurance company. Health insurance schemes funded by several state governments and the RSBY have yielded experience of both models, suggesting each has positives and negatives. An insurance company, as the intermediary, has expertise in handling enrolment, premiums, payments and monitoring for fraud detection, from its prior portfolio of several insurance products. The government finances but does not run the programme. However, the high overheads charged by companies are often expensive and they also demand higher premium payments from the government, as utilisation rates go up. Worse still, they may walk away abandoning the programme as happened with Arogyasri in Andhra Pradesh. However, public insurance companies have generally behaved better, with lower overheads and higher commitment and accountability.

A Trust is more likely to be in line with the governmental intent to deliver public good with public money. It is established by and accountable to the government. The overheads are lower. Though there is limited in-house expertise to begin with, it can be built up through hiring and accumulates as an asset that stays with the programme. The information technology architecture that is built up continues to serve the programme as it evolves alongside. However, the genetic link to the government may make the Trust vulnerable to political interference on behalf of errant but influential hospitals. The choice between a Trust and an insurance company to run a programme in any state is likely to be left to that government, since the NHPS will be dependant on 40% funding from states.

Those which have already been running the RSBY may prefer to utilise the existing delivery channel when they move to its alter ego, the NHPS. States which have been running their own state-specific “health insurance” programmes may or may not agree to merge them with the NHPS. Even if they do, the existing delivery model would carry the ease of familiarity. As the scheme is implemented, different state models will yield experiential evidence of which model works best in which context.

In either case, there will be a need for defining the services to be covered and criteria for empanelment of hospitals as well as setting of standard management guidelines for different diseases. Since payment will be made on a “fee for service basis”, systemic safeguards must be built in to avoid unnecessary admissions and procedures. Capacity must be developed for “strategic purchasing” of services from different providers with cost and quality controls.

The biggest question is how soon the central and state governments can develop strong primary health systems that will limit and guide the utilisation of secondary and tertiary care services funded by the NHPS. It must also be recognised that the poor prefer to avoid hospitalisation as they will lose wages and mostly depend on outpatient care and primary health services for their health needs. Without that protection, population health indices will not improve despite the NHPS, and high utilisation rates will make the scheme highly expensive over time. A claim that the NHPS opens the road to universal health coverage would then, in the Bard’s phrase, be: “much ado about nothing”.

K Srinath Reddy, President, Public Health Foundation of India. Views are personal.

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