Healthcare financing: Coming of age?

Breaking silos of healthcare, insurance and finance, while not an easy task, will be key to ensure healthcare access to all. It requires concerted efforts from all stakeholders with new-age approaches and technology

India’s healthcare landscape is currently experiencing a significant transformation driven by technological advancements, evolving public policies, and dynamic market forces. Central to this shift is the crucial element of healthcare financing, which encompasses an intricate network of funding mechanisms, insurance schemes, public-private partnerships, and innovative models.

Vikram Venkateswaran, Partner, Deloitte India shares, “India’s healthcare sector is undergoing a transformation fueled by investments in both public and private domains. Private hospitals, backed by a surge of $14 billion in PE funding in the last 4 years, are embracing technology to streamline operations. This translates to better diagnostics, improved patient experiences, and shorter hospital stays. The average length of stay in large corporate hospitals is down to 3.4 days thanks to these initiatives that are supported by data, analytics on a digital transformation backbone.”

Traditional models vs innovative approach

Traditional healthcare systems in India have historically relied on individuals paying for their own healthcare, placing a heavy burden on them. But this approach has proven unsafe, especially for vulnerable people.

Dr Puneet Khanduja, Lead – Health and Nutrition, MicroSave Consulting (MSC) shares that the Economic Survey 2022-23 confirms this trend, stating that almost half of all health spending in India is still paid by patients themselves directly at the point of treatment, although this has dropped as the government’s share of spending on health went up significantly after 2013-14. The ES 2022-23 also reported a concomitant decline in out-of-pocket expenditure as a percentage of total health expenditure from 64.2 per cent in 2013-14 to 48.2 per cent in 2018-19. Households in the lower wealth quintiles are more likely to face catastrophic health expenditure, with the odds of incidence and intensity being higher for these households.”

Gaurav Gupta, Co-Founder & CEO, CarePay opines, “In India, the decentralised nature of healthcare financing has resulted in a significant disparity in medical funding, leaving approximately 400 million citizens without access to essential healthcare services. This exacerbates financial burdens and restricts crucial medical care, a situation compounded by the rise in cash flow challenges faced by hospitals. These challenges often stem from delays in insurance reimbursements, placing significant financial strain on hospitals and limiting their ability to provide quality care and expanded services to all patients.”

Recent years have seen a shift toward new financial models, including health insurance plans, government subsidies, and financial services.

Dr Khanduja shares, “Innovative approaches like blended financing, crowdfunding, and healthcare lending are emerging to address affordability gaps and improve access to quality healthcare services. These new models aim to combine public, private, and philanthropic funding to create sustainable financing structures that cater to the diverse healthcare needs of the population.”

These systems are designed to spread financial risk, increase access to healthcare, and improve overall health.

Sharing his views on this, Chris George, CEO & CO-Founder, Qube Health said, “Healthcare financing is not new. But the way it has been done before is broken. It has essentially been a “desperation financing” solution and this needs to change.”

“Instead of focusing on providing financing at the point of care, we need to provide financing in the hands of the patient. This patient, who is the payor for healthcare then has the power of choice to decide which healthcare option is best for their family. It gives them more control. In these days of app-based payments for almost everything, it is high time that we put the power to pay, in the hands of every Indian”, he added.

 

Namit Chugh, Principal, W Health Ventures emphasises that over the last decade, the entry of new insurance distributors, better regulatory support, increasing use of technology and COVID-19 has led to the healthcare insurance growing 2x as faster than the general insurance industry.

He added, “Start-ups are now making insurance purchase, understanding, and processing simple and fast. Majority of the tech-led innovation has happened in distribution and purchase. Today, it is possible to browse through 10 healthcare plans online, compare them using intuitive visuals and also get an assistant to guide you on the right policy.”

How technology is revolutionising healthcare financing and delivery

The advent of technology has revolutionised healthcare financing in India. Mobile applications, telemedicine platforms and data analysis tools streamline processes, reduce cost management and provide transparency in financial transactions. With its secure and independent features, blockchain technology is exploring its potential to revolutionise healthcare payments and prevent fraud. By investigating these technological innovations and their impact on healthcare financing and services, we can pave the way for a more efficient, patient-focused ecosystem.

Explaining how technology is revolutionising healthcare financing,  Visalakshi Chandramouli, Managing Partner, Tata Capital Healthcare Fund said, “Technology is playing a transformative role in healthcare financing and delivery. For example, in the dialysis sector, the government has launched the Pradhan Mantri National Dialysis Programme (PMNDP) technology portal in May 2022. The portal integrates all dialysis centers under one platform, where the patient and dialysis session information is consolidated allowing for creation of a renal registry, faster payments for service providers and also facilitating smooth portability for patients from one center to another across the country. On the delivery front, technology is being leveraged for improved access (eg. telemedicine), improved productivity (eg. radiology AI), improved convenience (eg. @ home healthcare).”

Breaking silos of healthcare, insurance and finance, while not an easy task, will be key to ensure healthcare access to all. It requires concerted efforts from all stakeholders with new-age approaches and technology.

George highlights, “The ability to integrate a payments-infrastructure, healthcare financing, health insurance, and healthcare providers onto one mobile application is the truest example of how technology is revolutionising healthcare financing and delivery of healthcare. The movement of money, between the payor and the provider of healthcare, is the true ‘lubricant’ in the smooth delivery of healthcare. Especially in India where cell phone access far exceeds healthcare access.”

Fintech platforms are playing a key role in changing the way health insurance is acquired, managed and used. These platforms uses technology to close current gaps of affordability and make the process more transparent. From digital insurance marketing to AI-powered insurance recommendation engines, fintech companies are changing the way people and businesses use health insurance products and programs.

Talking about fintech start-ups, Dr Khanduja said, “Fintech start-ups are also leveraging technology to offer healthcare lending options, personalised patient engagement, and innovative payment plans, thereby improving the overall efficiency and effectiveness of healthcare financing and delivery systems. Innovative payment plans offered by these players are designed to make healthcare more accessible and affordable for patients. Flexible payment plans allow patients to pay for their medical expenses in installments, reducing the financial burden of healthcare costs.”

Gupta shares, “Embedded finance has emerged as a catalyst for empowering patients, offering tailored financing options for out-of-pocket health expenses. By providing enhanced patient experiences, fintech platforms offer a range of financing solutions at the point of care, such as zero-cost EMI, curated to cater to diverse portfolios. These solutions, imbued with a completely digital process and quick loan disbursals, make healthcare services more accessible and affordable. As a result, necessary care is not hindered by financial constraints, ensuring a seamless healthcare journey for all.”

“Thus, through a collaborative approach, fintech 2.0 and vertical financing facilitate seamless transactions across the healthcare landscape, enhancing the end-to-end healthcare journey. Prioritising innovation, customer-centricity, and inclusivity, technology holds the potential to revolutionise healthcare financing and delivery, fostering a brighter and more equitable future”, he added.

Impact of government schemes on healthcare financing

The Government of India has launched several flagship schemes aimed at improving healthcare access and affordability. The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PMJAY) and National Health Mission (NHM) are some of them.

Siddharth Singhal, Co-founder and MD of Vibcare Healthcare mentions, “Government schemes such as Ayushman Bharat and the National Health Mission are pivotal in reshaping the healthcare financing landscape. Ayushman Bharat, the world’s largest government-funded healthcare programme, aims to provide health coverage to over 500 million Indians, offering a safety net against catastrophic health expenditures. Similarly, the NHM focuses on strengthening healthcare infrastructure, promoting preventive healthcare, and expanding access to essential services, thereby augmenting the foundation for sustainable healthcare financing in the country.”

George also shares, “These are great initiatives, that are now finding faster traction through partnerships with private companies and start-ups building with their sandbox. Through open APIs and deeper collaborations, these schemes have the ability to have far reaching impact that surpass the impact of schemes in the India stack for payments and finance.”

Chugh believes that it’s an early but great step in the right direction to ensure better healthcare coverage to a larger population base. These welfare schemes have demonstrated wider reach – now inching towards 600M+ ABHA IDs; promised cover of Rs 5 lakh per family for 12 crore families; and already Rs 1 lakh crore reimbursed till December 2023.

But he also mentions, “However, only  approximately 30 per cent insurance in India is via public insurance. And even today, two thirds of Indian patients pay out of pocket (patient side problem) and hospitals suffer from payables and working capital crunch (hospital side problem). Dedicated focus on improving coverage, ensuring ground-level awareness and utilisation, fraud detection and also timely hospital repayments will add further credibility to the noble schemes and help achieve healthcare goals for the country.”

Recently, to widen the market and foster adequate protection from healthcare expenses, insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has removed the age limit of 65 years for individuals buying health insurance policies. By abolishing the maximum age restriction on purchasing health insurance plans, IRDAI aims to foster a more inclusive and accessible healthcare ecosystem, ensuring adequate protection against unforeseen medical expenses.

“Outside of this the government has also provided regulatory environment to help health insurance grow. The just announced policy of removing age bar for a healthcare policy is on the same line. IRDAI has welcomed innovation by introducing friendlier guidelines like the sandbox license to pilot new products across the spectrum – distribution, underwriting, manufacturing, servicing, and claims”, Chugh added.

The evolving  landscape of public-private partnerships in healthcare financing

Public-private partnerships (PPPs) aims to bring together the power of resources by government, initiatives by private sector including community partnerships. PPPs are emerging as an crucial strategy for financing and delivering healthcare in India and expanding coverage in underserved areas.

Singhal opines that by aligning incentives and sharing risks, PPPs have the potential to drive sustainable development and inclusive growth in the healthcare sector.

George believes that we are a long way off in this regard, however any initiative that connects the dots between the India stack for finance, healthcare and insurance, will truly democratise access to healthcare in India.

Chugh explaining the private sector dynamics said, “The health insurance premium in India (gross written premium) for the last 12 months is Rs 1 lakh crore+ already (20 per cent+ up from last fiscal) with 37 per cent coming from standalone health insurance companies. Roughly 1/3rd of this came from the top-5 standalone health insurers (rising at ~26 per cent YoY). While these insurers are typically legacy companies, the industry growth has encouraged new players to enter as set-up and distribution becomes easier. Recently, Narayana Health (India’s leading hospital chain) obtained an IRDAI license to offer insurance also. This opens up the possibility of full-stack managed care organisations in India where the provider has greater visibility to patient data and is also better incentivised to provide quality preventive care and improve patient outcomes long-term.”

Chandramouli also shares, “While there have been notable successes of PPP projects in the diagnostics and dialysis space, segments such as hospitals have seen limited uptake primarily due to the structure and financial viability of the proposed PPPs. The government is working on improving the viability of PPP in the hospital segment for example the super specialty Hospital in Katra, Jammu run by Narayana Health has been successful. We can expect private sector players to actively bid for projects if the financial viability of the projects are addressed.”

Challenges and opportunities

Healthcare financing ecosystem is making a significant progress but challenges still persist. Imbalance in resource allocation, some administrative complexities and 100 per cent accessibility remain challenging problems.

Dr Khanduja also believes that affordability remains a critical issue as healthcare expenses outpace household incomes for many. 

He said, “The NITI Aayog’s “Health Insurance for India’s Missing Middle” report highlights the significant gap in health insurance coverage for a large segment of the Indian population, who are not poor enough to qualify for government insurance schemes but also cannot afford private insurance.” 

George said, “Cutting through the silos of healthcare, insurance and finance is a tough challenge for anyone. This however is also the opportunity. Solving the healthcare access problem in India, begins by solving the healthcare payments and financing problem first.”

The pandemic also underlined the need for a sustainable financial system. This in turn creates an opportunities for policy reforms, collaboration and innovation.

Singhal mentions, “Addressing disparities in access, ensuring financial sustainability, and enhancing regulatory frameworks are critical tasks that require concerted efforts from all stakeholders. However, amidst these challenges lie immense opportunities for innovation, collaboration, and impact. By harnessing the power of technology, fostering partnerships, and prioritising inclusivity, India can pave the way for a resilient and equitable healthcare financing ecosystem.”

Way forward

As India’s healthcare sector continues to evolve, the importance of a sound and inclusive financial system cannot be ignored. From traditional to innovative, from government intervention to private sector, from PPPs to technological advancements, all healthcare services play an important role in the future development of healthcare in India. On the path to universal health coverage, affordability, and quality care for all, stakeholders in the world health system must work together.

Kalyani Sharma

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[email protected]