Insurance as a healthcare financing mechanism will always have a major role to play | Shreeraj Deshpande

Ayushman Bharat rechristened as the Pradhan Mantri Jan Aarogya Yojana (PMJAY) is the largest health insurance scheme, which has been very well conceived with a lot of ground work done by the government think tank.

PMJAY would be implemented by majority of the states in three different models trust, mixed and insurance model. While we presume the reasons for the governments in deciding to go for a trust model are on careful analysis of their earlier experiences, this decision has surprised the insurers because of the sudden change of approach by many states as insurers have played a very important role in implementing government schemes till date.

Non-life insurance companies and health insurance companies are highly regulated by the Sectoral Regulator in terms of

• Protection of policy holders interest
• Investment of policy holders’ funds
• Control on expenses of management and solvency.

Insurance companies have got significant experience in handling mass insurance schemes of central and state governments. These trusts formed should develop expertise in implementing such large schemes, build efficiencies in doing so and may also involve substantial costs in developing capacity. To avoid the ills of being monopolistic in implementation without the element of competition such trusts will have to ensure they do not face implementation issues and have a strong grievance handling mechanism. Competing insurance companies brought in higher levels of service and optimisation of price and implementation costs.

Each state government needs to set up separate trusts and these trusts would manage schemes like any other government schemes. The efficiency of respective trusts and practices adopted will differ from state to state and efforts are needed to bring in uniformity. Very few states have been able to regulate the healthcare sector in their respective states and this could be an opportunity to implement or adopt the Clinical Establishments Act across all states.

One of the most basic objective of insurance is spread of risk. Implementing insurers spread the risks over the entire geography of the country while respective trusts concentrate the risks within the same state. The implementing agencies from different states will have to pool and learn from different experiences across the country in implementing such schemes effectively. A strong mechanism should be in place.

The success of this scheme would be mainly dependent on implementation of the scheme. Regulating providers, controlling frauds and most importantly the will to effectively implement such schemes would be of paramount importance.

If we go by the life cycle of such schemes one can observe that they start with lower awareness, lesser utilisations and lesser outflows. Over the years as awareness increases, the utilisations increase and after a period of 4-5 years the utilisations reach high levels. Maintaining the efficiencies in implementation at this stage would become very important considering both the utilisation costs as well as costs of implementation.

Healthcare costs would be increasing because of increased utilisations and medical inflation. Today the Central and State Governments spend 60/40, 90/10 or 100 per cent depending upon the states/UT involved. Will both the central and state be able to continue spending in the same manner without a strain on the budgets of the governments, hopefully yes, with a stronger economy. What would be the alternatives available at that time to mitigate such risks? Will transition to voluntary insurance models partly, or part financing by the citizens would be one of the few options thought of?Alternatively, will this ultimately cover the entire population of the country, which is less likely given the numbers in our country.

Out of pocket expenses still amount to 62 to 65 per cent of healthcare expenditure. The challenge is to capture a significant part of current household spending and assure that the total was spent on more cost effective and higher quality services. Therefore, insurance as a healthcare financing mechanism will always have a major role to play. Smooth migration of population from fully government funded schemes to voluntary insurance model as the economy flourishes will be very
important.

Lastly an integrated approach of the 1,50,000 wellness centres catering to the out-patient requirements and acting as gate keepers for hospitalisation, developing capacity by means of upgrading district hospitals and medical college hospitals to tertiary care speciality hospitals will play a major role in successful implementation of this scheme on the long run.

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