This interview with Brookings India Research Director Shamika Ravi first appeared in Scroll. The views are of the author(s).
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 over-diagnosed. 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.
To read the entire interview, please click here.