What the US Health Insurance Programme Can Teach India

Why has India chosen the path of expanding medical insurance instead of a more comprehensive approach to health?

The concern with rising inequities in access to medical care, rising out-of-pocket expenditures and unmet treatment needs have been addressed with yet another targeted medical insurance scheme for poor households. The idea of a targeted medical insurance is not new. Several southern states like Andhra Pradesh and Karnataka had introduced such schemes many years ago. In 2008, the previous government launched the Rashtriya Swasthya Bima Yojana (RSBY) that covered poor families for hospitalisation. The present government renamed and continued with the same scheme.

The announcement of a National Health Protection Scheme (NHPS) in this year’s Budget is a clear signal that the focus is on universal health coverage through targeted public insurance schemes. The Budget has allocated more towards the NHPS than for strengthening public health services. In effect, these schemes will support the expansion of private insurance and hospital industries.

A leading business newspaper described this scheme as ‘Modicare’, since it is designed along the lines of the American Medicare programme. The homework for ‘Modicare’ has been going on for more than two years within the Ministry of Health, with technical support from the World Bank. Most commentators on the Budget have hailed this move by the government, but some have expressed their caution and reservation.

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There is much to be learned from the American experience regarding the design and implementation of the history of Medicare. The history of Medicare is closely linked to the war on poverty of the 1960s in the US. During this period, there was a strong move for a universal public insurance scheme akin to the Canadians.

The private insurance companies and the hospital industry actively opposed this. As a result, the government settled for a targeted insurance scheme for the poor and the elderly. This demand-side financing led to public subsidies for the expansion of the supply side through private provisioning.

Over the years, the experience of these schemes showed irrational overuse of medical interventions, which had an inflationary impact. In order to address rising costs, several measures to reduce scope and depth were introduced. This resulted in an increase in the uninsured and underinsured among those entitled for Medicare and Medicaid. Several efforts to correct this by the Bill Clinton and Barack Obama administrations met with resistance from the insurance, pharmaceutical and hospital industries.

An important lesson from the American model of healthcare is that spending on medical care alone does not improve health outcomes. The US has the highest expenditure on medical care, but does not compare well in terms of health outcomes and equity in access when compared with other developed countries.

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Why has India chosen the path of expanding medical insurance instead of a more comprehensive approach to health? Over the last three decades the growth, consolidation of markets in medical care has played an important role in pushing for a variety of public subsidies.

In a context where the insurance coverage is small, the clientele for private hospitals is inadequate to earn profits. In order to increase patient volume, expanding demand through insurance is a sure way. Public insurance schemes assure private hospitals a steady supply of patients to ensure their viability and survival. Therefore it is not surprising that the insurance markets and the hospital industry have welcomed the new scheme. For them it is an opportunity to expand their reach a significant proportion of the population who are ‘bottom of the pyramid’.

There are larger concerns regarding the financing and architecture of the NHPS. Is this just a rejig of the Rashtrya Swasthya Suraksha Yojana (RSSY)? There were serious loopholes in the implementation of RSSY, especially in the empanelment of private hospitals. How does the new scheme propose to address these? Also, how will this scheme engage with the existing state-led public health insurance schemes? Is this just another populist programme that is full of hype without substance? These are some of the questions that need to be studied closely as and when the scheme is rolled out.

Rama V. Baru is a professor at the Centre of Social Medicine and Community Health at Jawaharlal Nehru University.