Professionals associated with private hospitals delivering health insurance saw the present stand-off coming. Unable to bear losses well exceeding 20 per cent, public sector health insurers stopped cashless treatment since July, so patients have to first pay and then get reimbursed. Cashless treatment is being slowly restored as private hospitals fall in line, agree to standard charges for standard treatments and procedures, and get included in insurers’ “preferred provider networks” (PPN). At the time of writing, topmost hospital chains like Apollo and Max and standalone hospitals like Manipal in Bangalore are still negotiating.
Who are the bad boys? The Indian Express reports Naresh Trehan, industry leader and head of Medicity, acknowledging there had been some instances of over-billing. Insurance companies have legitimate concerns over mismatch between premium collected and payment made. “So, there is a need to bring alignment... balance between best price and quality health care,” he said.
The root cause is the unviability of the business model. There is no incentive for private health-care providers to reduce cost for patients. In fact, the incentives are for the opposite. Hospitals judge specialists empanelled with them by how much business they bring. An apocryphal story about a leading non-profit run by a business house in Kolkata says a trustee’s spouse one day decided to step in and shake up things. She called for a list of how much business each specialist brought and decided to sack the non-performers. It turned out that all the anaesthetists were getting axed! Unsurprisingly, specialists at Narayana Hrudayalaya in Bangalore are salaried employees and the hospital has already agreed to standard rates and joined the PPN.
Professionals readily agree that a patient’s bill jumps as soon as the provider knows he is covered by health insurance. Yes, there are rate charts for standard procedures but it is easy to explain why unforeseen this or that had to be performed. Specialists in India routinely get a commission for tests recommended. It is not even illegal. Runaway health-care costs were reined in in the US once insurers got serious and third-party administrators (TPAs) got cracking.
TPAs in India initially tried to pre-authorise admission and perform concurrent audit. But volumes overwhelmed them. Introduction of cashless treatment has led to a surge in business. With the industry growing at over 30 per cent, all stakeholders realise that the goose laying the golden egg should not be killed. All need to become good boys, including patients who say things like: let me stay on in hospital till the stitches are removed, after all the insurance company is paying. And if the hospital is like a five star hotel then the adverse incentive is obvious.
The whole matter is not really a public policy concern. It involves the richest of Indians, less than the top 10 per cent who go in for private health insurance. Health-care facilities for the vast majority of Indians are appalling or non-existent. The policy issue is that in the absence of a functioning public health-care system and with rising upper crust incomes, India is opting for the one truly bad model coming out of America, its drug and insurance firms-driven health-care system. What should have been adopted is the European model of universal state-provided health care of high quality.
I asked a hospital administrator whom I respect how he wished to tackle the information asymmetry between the patient and the doctor whose “advice” he accepted implicitly. The reply was that people are becoming increasingly aware, courtesy, among other things, the Internet. The nightmare I see before me is that of the endless wrangles between US patients and their insurance companies — over some new treatment that the patient has come to know of and is insisting on getting — coming to India. The administrator also says price controls are wrong; patients benefit from price competition among providers. Still, how about having a benchmark, which is not the best in class but an average of the best? How about a hospital telling the insurance company: we will better your standard rates, do for less, give us more business?
But it is no good saying the European model is better when public sector health care in India does not deliver. There seems to be a way out and it is happening in the south. The Yeshasvini cooperative health-care scheme for Karnataka farmers, started in 2003, collected Rs 36 crore premium (Rs 150 per head) in 2008-09, got government help of Rs 30 crore, handled 75,000 surgeries, which was 2.46 per cent of enrollment. The Rajiv Arogyasri health-care scheme in Andhra Pradesh for below poverty line families has from April 2007 till now pre-authorised Rs 2,000 crore in treatment. In Tamil Nadu, the Kalaignar health insurance scheme now has 14 million enrollments. Entitlement is Rs 1 lakh per family for four years, premium is Rs 469 per family. Over 30,000 have been treated so far for Rs 102 crore.
The model is mostly public funding of private delivery — wide coverage, small premium paid by the poor, the state chipping in quite a bit, and care provided by a network of public and private hospitals, with the latter doing business under tough standard-cost guidelines. These state governments are reasonably resource-rich and know what to do to stay in power. Tamil Nadu and Kerala, in any case, have the best public health-care systems in the country. My sense is, have private health care by all means, but also have a well-functioning public health-care system to have a sense of balance.
