By Nagaraja Sarma
Health insurance sector and Covid-19: The Covid-19 pandemic brought in unprecedented financial stress to Indian middle-class families. India’s middle class was already shrinking when Covid struck. The pandemic and the lockdown measures resulted in a large number of job losses. To make things worse, huge out-of-pocket expenditure is pushing several middle-class families into poverty.
The out-of-pocket healthcare expenditure happens because of two reasons. The number of people who have health insurance cover is very small — about 6-7% of the population. And most of this population is covered under the Ayushman Bharat scheme launched by the Narendra Modi government and insurance schemes of state governments such as the one launched by the Tamil Nadu Government.
These schemes have covered large populations. But in such schemes, the sum insured is very small. The government cannot afford to give huge health cover it everybody. These schemes enter into tie-ups with the various hospitals, mostly the small and middle-sized ones. They may also force large hospitals into the fold through decrees or legislation and get them to earmark a few beds for treating people covered under these public health insurance schemes. In these cases, the patients will have to spend out of pocket as the insurance cover is low and the actual expenses are high.
Rise in out-of-pocket expenditure
In the case of Covid patients, they will be going out of pocket straight. The solution is to increase the cover to a reasonable level. So the average sum insured around Rs 1-2 lakh. In the case of Ayushman Bharat (PMJAY), the cover is less than Rs 50,000 per person. Better care is not expected with such a low amount. While the people were blamed for the Covid-19 crisis, the actual reasons were inadequate infrastructure and weak public health facilities that crumbled under the caseload during the second wave of Covid-19.
The shortage of oxygen happened suddenly when the caseload increased. No government can arrange adequate supplies. I was going through WhatsApp messages where doctors were blaming everything on infrastructure. Some others said developed countries such as the US, UK, and Italy saw more deaths than India. Infrastructure and all are created for normal situations, not for a once in a hundred years situation like Covid-19. During a pandemic, a large number of people will rush to hospitals . They may make temporary arrangements at car parking areas or under the flyovers. But, what will they do for oxygen or ventilators?
I will blame the people because they never demanded hospitals and medical infrastructure from the government. They always asked for free gas, free electricity, free water, and all kinds of freebies. Even in Hyderabad municipal elections last year, the poll promises were 50% reduction in the municipal taxes on property. The government now gives 20,000 liters of free water. So people seek and get freebies from politicians who are only too happy to oblige. No one sought better health infrastructure, more doctors, or more medical colleges. The culture of freebies should end and people should learn to ask the right questions.
Need a robust public health system
The government may consider a proposal of leasing out hospital infrastructure. In hotel industry, the building and infrastructure are owned and run by different people. So government can think in terms of developing the infrastructure and leasing it out to doctors, at least at village level. The government can develop these properties and offer them at moderate rates line the way railway canteens are given on contract. The doctors can charge less as the infrastructure comes at a nominal rate.
The problem with the private sector hospitals is that there is no regulation. When nobody is controlling, naturally they will use the supply-demand mechanism to arrive at prices. It’s like an auction. So whoever comes with cash or huge insurance cover will get priority. When someone comes with a small policy of Rs 1 lakh, they will prefer another person with Rs 25 lakh in cash waiting for the bed. That is how it’s happening. So what is required is regulation and control. I will not blame the doctors or nurses. The hospital owners and the management also are running a business and the prices will be arrived using supply-demand mechanism.
There is a lot of fear associated with contagious diseases. Even those who could be treated at home also rush to hospitals. Singer SP Subramaniam said openly that he got admitted in a hospital just to avoid the disease spreading to the family. When a person of his financial standing and huge houses thinks that way, you can imagine what ordinary people would do. So, many people rushed to the hospitals to avoid spreading the disease to others in the family. We need to have more and more temporary wards with reasonable facilities where people can come for isolation, but hospitalisation should be reserved for only those really need it.
Pvt hospitals bleed health insurance firms dry
Since I’m from the insurance sector, let me answer the criticism directed at insurance companies. The main criticism is that insurance companies are paying just half of the claim. The amount allowed is as per the policy limits. There are cases when the cover is Rs 20 lakh and the amount paid is only Rs 12-15 lakh. That’s because there is the provision in the policy that the amount actually incurred is payable, not the entire amount. This happens because of some greedy hospitals that bill you according to your insurance policy.
If you go with a Rs 20 lakh policy, they will try to bill you the entire amount. They will subject me to all kinds of diagnostic tests even if you don’t need them. So we allow what is reasonable. The policies were devised when there was no Covid. So for contagious diseases, the normal agreed rates are allowed. As a result, some amounts don’t get paid and this is how the insurance sector operates.
If insurance companies are expected to pay the entire hospital bill, the premiums will go up. Most of our customers are middle and upper middle-class people that is people. These guys are lower and middle level employees, shopkeepers and businessmen. They won’t be able to pay premiums like Rs 40,000-60,000. For an 85-year-old person, the premium will be Rs 75,000. Who will be able to afford this?
Health insurance gained popularity in India only around early 2000s. Most of us used to go to government hospitals for treatment. We started with reasonable premium rates, but slowly hospitals started aligning their treatment based on insurance cover. When it comes to maternity cases, normal deliveries have become a thing of the past. In a majority of cases, hospitals go in for cesarean section. If you around 45-50 years and go with a mild chest pain due to some acidity problem, you are subjected to various tests. They do all kinds of things and subject you to a lot of tests and bill heavily as per the sum insured.
If I go with a Rs 5 lakh cover, my treatment gets completed at that amount. If I go with Rs 20 lakh insurance, they will definitely bill at least Rs 18 lakh. There is the need of an industry regulator. There SEBI for capital markets, and TRAI for telecom sector, we have no regulator for the health sector. The regulators draw power from legislations. Read the preamble of those Acts. They all talk about vulnerability of the public at large. Why there is no regulator for healthcare? Why is everybody silent on that? Of course, we have been talking about it now. We need is to create a regulator for healthcare.
(Nagaraja Sarma is Secretary General, General Insurance Council. This article is the reproduction of Mr Sarma’s speech at a webinar conducted by Policy Circle.)