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A Few Concerns Insurance in India Healthcare

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 He a lt hC A R E P er s p ec t i v e s

By Dripto Mukhopadhyay

Healthcare
Insurance
in India
A Few Concerns

10 May 1 - 15 2018  Geography and You 108 issue

 Only 28.7 per cent of Indian households can
afford health coverage. Among these house-
holds government schemes predominate
providing coverage to 93 per cent in rural
areas and 80 per cent in urban areas.
PHOTO: prasad

Geography and You  May 1 - 15 2018 11

The Union Government’s budget speech of 2018-19 announced two major initiatives,
the National Health Protection Scheme and the establishment of Health and Wellness
Centres. Central and state governments have always put health at the forefront of
planning, but public health expenditure as a percentage of GDP has remained low.
Low expenditure, skewed distribution of coverage across states, lack of facilities in
government hospitals among other problems prevail in the public health sector.

T
he National Health Policy, 2017 envi-
sioned 1.5 lakh health and wellbeing
centres to bring health care system
closer to locations where people live. A
budget of 1200 crore was allocated for this flagship
programme. Admitting that lakhs of families in
India borrow or sell assets to receive indoor treat-
ments at hospitals, the Indian Finance Minister
stated during the January 31, 2018 budget speech
that the “Government is seriously concerned
about such impoverishment of poor and vulner-
able families. Present Rashtriya Swasthya Bima
Yojana (RSBY) provides annual coverage of only
30,000 poor families. Several state governments
have also implemented/supplemented health pro-
tection schemes providing varying coverage. My
government has now decided to take health pro-
tection to more aspirational level. We will launch
a flagship National Health Protection Scheme to
cover over 10 crore poor and vulnerable families
(approximately 50 crore beneficiaries) provid-
ing coverage upto 5 lakh rupees per family per
year for secondary and tertiary care hospitalisa-
tion.” If implemented, this reportedly will be the
world’s largest government funded healthcare
programme. In the backdrop of this, the article
attempts to provide an assessment of current situ-
ation regarding Indian health insurance market
and likely implications of externalities that are
required to make intentions of the government, a
success.
The above figures suggest one key aspect
clearly. Though, both the Centre and the state
governments, always claim health to be a criti-
cal component of planning, reality is far from it.
As Figure 1 suggests, public health expenditure
as percentage of GDP was far below many other
countries of the world. More importantly, even
with scanty fund available for healthcare sector
development, total funds that remained unspent
was significantly high. Except the last couple of
years, unspent funds was nearly 20 per cent of the
total fund (Fig. 2). This puts a question on the au-
thorities about their true intention of proactively
developing healthcare in the country, which is
perhaps the most important development param-
eter. It is obvious that while the basic healthcare
facilities are given less importance compared
to many other sectors, health insurance would
hardly figure in governments’ agenda, at least in
reality. Let’s look at the current health insurance
sector.
Health insurance sector in India
To understand the current scenario and pos-
sibilities of health insurance sector in India it is
pertinent to understand types of health expense
coverage one avails at present. Only 28.7 per
cent households are privileged enough to avail
any kind of health coverage—disaggregated as
28.9 and 28.2 per cent for rural and urban areas
respectively. As evident from Fig 3, among the
households covered under any health scheme,
about 93 per cent in rural areas and 80 per cent
in urban India are covered by governmental
schemes. State health insurance scheme and
RSBY are the two government schemes that pro-
vide maximum coverage to both urban and rural
areas. Health insurances purchased from private
companies (by households) are as low as 8.5 and
1.8 per cent in urban and rural areas respectively
covered under any health scheme.
Equally skewed distribution is observed in rela-
tion to wealth index. The National Family Health
Survey (NHFS) shows that except the topmost
quartile of wealth group, for rest of the quartiles

12 May 1 - 15 2018  Geography and You 108 issue

Fig. 1: Public Health Expenditure as Per Cent of GDP Fig. 3: Per Cent Distribution of Households
2015-16 Covered under any Health Scheme/Insurance by
Rural and Urban

1.08 Community
Despite the 0.9 Urban
1.30 Health insurance 0.5 Rural
importance the Indian
government puts on Reimbursement 3.7
2.65 0.5
health as a component from employer
3.1 of planning, public Other through 3.8
3.26 health expenditure employer 0.7
as a percentage of 4.1
3.49 GDP has remained Any other
3.4
3.69 far below many other Central Government 8
countries. Health Scheme 3.3
3.83
Other privately 8.5
4.17 purchased 1.8
South Africa 4.24 Employee State 10.6
Insurance Scheme 1.9
7.58
Rastriya Swastha 19.5
8.28 Bima Scheme 41.3
State Health 45.9
Source: Economic Survey 2015-16 Insurance Scheme 50.2

0 10 20 30 40 50 60
Fig. 2: Per Cent Unspent of Total Grant Total funds that
remained unspent Only 28.7 per cent of Indian households have the
18.52 19.68 19.76 was significantly monetary means to avail health coverage. The numbers
high even in can be broken down to 28.9 per cent for rural and 28.2 per
10.09 the scenario of cent for urban areas. Among households availing health
low funds being schemes, government schemes provide coverage to 93
3.32 allocated for the per cent in rural areas and 80 per cent in urban areas.
healthcare sector.
Source: National Family Health Survey (NFHS-4), 2015-16,
2012-13 2013-14 2014-15 2015-16 2016-17
International Institute for Population Sciences,
Source: Controller General of Accounts Mumbai, December 2017.

Fig 4: Per cent Distribution of Households Covered under any Health Scheme/Insurance by Wealth Index

Lowest Second Middle Fourth Highest

70 There is a skewed distribution between private

60 and state schemes vis-a-vis wealth index.
Only topmost quartile availed private schemes;
50 the remaining 95 per cent of households are
40 covered under state health insurance scheme
and Rashtriya Swasthya Bima Yojana (RSBY).
30
20
10
0
Bima Scheme
Employee State
Insurance Scheme

Rastriya Swastha
Health Scheme
Central Government

State Health
Insurance Scheme
Other privately
purchased
Community Health
Insurance

Other through
employer

Reimbursement
from employer

Any other

Source: National Family Health Survey (NFHS-4), 2015-16, International Institute for Population Sciences, Mumbai, Dec 2017.

Geography and You  May 1 - 15 2018 13

state health insurance scheme and RSBY are the Fig. 5: Percentage of Households with at Least
most important options. As expected, households One Usual Member Covered by Health Scheme or
Insurance
covered under health insurance by private service
providers is significantly high for the topmost Manipur 3.6 Financial coverage
wealth quartile. Jammu & Kashmir 4.2 of households is
Apart from rural-urban wealth distribution, Nagaland 6.1 skewed across
Uttar Pradesh 6.1 states. Andhra
financial coverage of households for healthcare is Assam 10.4 Pradesh has 75 per
extremely skewed across states in India. While the Haryana 12.2 cent coverage for
per cent of households with at least one member Bihar 12.3
household, while
covered under any health scheme or insurance Jharkhand 13.3
Manipur records 4
Maharashtra 15
is as high as 75 per cent in Andhra Pradesh, the Delhi 15.7
per cent. Southern
same is as low as about 4 per cent in Manipur. Goa 15.9 states are ahead of
Madhya Pradesh the national average,
Significant regional disparity and more impor- 17.7
Rajasthan 18.7 with the exception of
tantly, intra region disparity is sharp. All southern Uttrakhand Karnataka.
19.5
states are much ahead of the other regions of the Punjab 21.2
country. However, in Karnataka this percentage is Gujarat 23.1
marginally lower than India average. While most Himachal Pradesh 25.7
of the north-eastern states record a coverage above Karnataka 28.1
India 28.7
national average, this percentage is less than 10 in Sikkim 30.3
Assam, Nagaland and Manipur. All western and West Bengal 33.4
northern states are below average. Surprise inclu- Meghalaya 34.6
sion among the top states is Chhattisgarh which is Mizoram 45.8
Kerala 47.7
ranked at number two with a health coverage of Odisha 47.7
68.5 per cent. Tripura 58.1
It is heartening to see that in a large number of Aruanachal Pradesh 58.3
states at least one member is a beneficiary of a sort Tamil Nadu 64
Telangana 66.4
of healthcare coverage. However, for healthcare Chhattisgarh 68.5
it is critical to understand whether the covered Andhra Pradesh 74.6
people are delivered quality services. Healthcare
0
10
20
30
40
50

80
60
70
coverage without quality services is as good as
Source: National Family Health Survey (NFHS-4), 2015-16,
no health cover. As shown in Fig 3 and Fig 4, out International Institute for Population Sciences, Mumbai,
of 28.7 per cent households where at least one December 2017.

member is covered by any type of health scheme

or insurance, more than 95 per cent are covered
by either state government or central govern- Fig. 7: Average Expenditure in Case of Hospitalisation-
Public Vs Private Hospitals
ment schemes. Therefore, the financial assistance
for treatment will be available in government 35000
facilities only. But do people have confidence in 30000
25000
the government facilities to avail this financial 20000
assistance in case health issues arise? Figure 6 15000
presents an interesting picture. It shows that in 10000
most states more than 50 per cent of the people do 5000
0
not use government facilities. Two major reasons Rural Urban
are cited—long waiting time and poor quality Public hospital Private hospital
of treatment. It is well understood that in case
of any serious illness, immediate treatment and A large number of households cannot avail treatment from
public hospitals, and therefore rely on private hospitals not
quality treatment are must. Therefore, it is quite
covered by state schemes, paying five times the cost they
unlikely that people will stand to be benefitted would incur at public hospitals.
by the present financial assistance for healthcare
coverage. The latest NSSO report (2014) suggests Source: Health in India, NSSO Report No. 574, 71st Round,
that 68 per cent of the urban population and 58 January to June 2014.

14 May 1 - 15 2018  Geography and You 108 issue

 Fig. 6: Usage of Government Healthcare Facilities

Jammu & Kashmir

Himachal Pradesh
Punjab
Uttarakhand
Haryana Arunachal
Delhi Pradesh
Sikkim
Rajasthan Uttar Pradesh Assam Nagaland
Bihar
Meghalaya Manipur
Tripura
Jharkhand Mizoram
Gujarat Madhya Pradesh West Bengal

Chhattisgarh

Odisha
Maharashtra

Even when 95 per cent of

households are covered by
Andhra Pradesh Per cent
Goa government schemes, usage of
Above 80 government healthcare facilities
80 -70 is disproportionate to coverage,
Karnataka 69-60 with 50 per cent of people covered
59-50 under state health schemes not
actually availing the government
49-40
health services.
Kerala 39-30
Tamil Nadu 29-20
19-10
Below 10
Map not to scale

Source: Survey (NFHS-4) National Family HealthSurvey (NFHS-4), 2015-16, Interna-

tional Institute for Population Sciences, Mumbai, Dec 2017.

per cent of rural population go to private hospitals
for their treatment.
The NSSO report also shows that on an average
the treatment cost in case of hospitalisation is
INR 18,268—INR 14935 for rural and INR 24436
for urban areas. Figure 7 presents the expense
scenario of treatment in public and private hos-
pitals. In both rural and urban areas, the average
costs in private hospitals are four times more
than that of government hospitals. Since the large
number of households cannot avail treatment in
public hospitals due to various reasons, they need
to opt for private hospitals under compulsions.
Therefore, not only does a large number of people
incur four times higher treatment cost, but it is
devoid of any financial assistance as opposed
to treatment in government hospitals. This ex-
penditure is but obviously met either from their

Geography and You  May 1 - 15 2018 15

The average expenditures
in private hospitals is about
four times than that of the
government hospitals in rural
as well as urban areas.
savings or through borrowings. With more than
60 per cent households below INR 1.5 lakhs per
annum income group, the average expenditure
itself is about 20 per cent of annual income. How-
ever, in many of the cases this may go beyond
annual income of poor households, especially if
the treatment is done in private hospitals.
Key points
A few key issues emerge from this analysis.
• Even with extremely low public expenditure on
healthcare facilities, significant amount of fund
available goes unspent.
• Only 28.7 per cent of the households are covered
under any scheme of health scheme or insuranc-
es, where at least one member of the household is
covered (according to NFHS report). However,
according to NSSO report this is even lower.
• In both rural and urban areas majority of these
households are covered by either state govern-
ment or by central government schemes.
• According to wealth index, except the top quar-
tile, for the rest government schemes are the only
major source of any healthcare coverage.
• Significant discrepancies are noted across states
in terms of healthcare financial coverage. South-
ern states are much ahead when the coverage
is compared.
• However, across states large number of the
households do not opt for government hospitals
due to poor treatment quality and waiting as
major reasons.
• The average expenditures in private hospitals is
about four times than that of the government
hospitals in both rural as well as urban areas.
People incur exorbitant costs under duress.
16 May 1 - 15 2018  Geography and You 108 issue
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A few concerns for future
With the Finance Minister’s announcement of
Ayushman Bharat and bringing 10 crore poor
households in the net of health insurance, a few
questions arise:
• Whatever small fund is available for health
and family welfare, larger chunk is allocated
for family well being than creating healthcare
infrastructure. According to India Health
Statistics 2017, as of March 2017 there is not
even a district hospital in every district in
several states.
• It is also well known that existence of healthcare
facilities is disproportionately biased towards
urban areas. Rural areas are majorly devoid of
good healthcare facilities.
• Though every year a large number of students
pass out from government and private medical
colleges, most of them are unwilling to serve in
rural areas.
• In this situation, with already more than 95 per
cent of the covered households under govern-
ment schemes, an addition of 10 crore household
to this base will bring more or less everyone
under 100 per cent government schemes. Where
will they be treated?
• Unless the public healthcare facilities are in-
creased in number and improved in terms of
quality treatment and other relevant facilities,
the situation will remain the same.
References
International Institute for Population Sciences
(IIPS), 2017. National Family Health Survey
(NFHS-4), 2015-16: India. Mumbai: IIPS.
Jain D., 2018. Budget 2018: India’s health sector needs
more funds and better management, Livemint,
January 25.
Ministry of Finance (MoF), 2016. State of the Econ-
omy: An Overview. Available at: https://www.
indiabudget.gov.in/budget2016-2017/es2014-
15/echapter-vol2.pdf
Ministry of Statistics and Programme Implementa-
tion (MoSPI), 2014. Health in India: NSS 71 st
Round. Government of India: MoSPI. Available
at: http://mospi.nic.in/sites/default/files/publi-
cation_reports/nss_rep574.pdf
The author is an expert in Applied Economics & is a
Consumer Behaviour Practitioner, New Delhi.
dripto.mukhopadhyay@gmail.com