The art of insuring
The things for India to pick up from the US healthcare debate
The public debate in the US over reforming its healthcare system is a tremendous opportunity for India to learn. Given the level of development of India’s health insurance sector,we can pick and choose what will work best here,while staying away from policies and programmes that proved to be costly in the US.
The broad goals for India and American reform are similar: Obama,in his address to Congress on September 9,laid them out as covering the uninsured,reducing the costs of healthcare,and more security for those with insurance. In India,only 15 per cent of India’s population has any kind of health insurance,and only 2 per cent has private health insurance,so the broad goals here are also accessibility and affordability.
Here’s what India can learn from the US to achieve these broad goals. First,build the retail model,as against group insurance. The predominant way to get health insurance in the US is through an employer,who purchase large “group” plans for their employees. Quit or lose your job,and you also lose your cover. The “retail” model of health insurance is extremely rare,and very expensive. As the costs of healthcare have risen,employers have had to build these costs into their products,making their products uncompetitive in the global marketplace — and in the case of the automobile industry,nearly bankrupting them.
India appears to have followed the US by starting to offer health insurance as an employee benefit. Costs will increase,and they will wind up in product costs,decreasing competitiveness. India must focus on building the retail model.
Second,insurance must cover out-patient care. US products cover the entire health spectrum: in-patient,out-patient,preventative,curative,medical,dental,vision. Current products in India only cover hospitalisation — nothing for out-patient or preventative care. In 2008,India spent Rs 2,00,000 crore on healthcare. Of this,a whopping Rs 130,000 crore,70 per cent,was spent on out-patient care! Yet,Indian insurance companies are continuing to develop products that focus only on hospitalisation. Not only is expanding beyond that to preventative care good business,it will also lead to better health. It might appear to be counter-intuitive; however,covering out-patient care will reduce total healthcare expenses,by allowing early detection of diseases,and preventing patients from becoming chronically ill and requiring expensive hospitalisation.
Indeed,prevention and wellness is one of the important elements of American reform. Obama wants insurance companies to provide incentives to consumers to change “unhealthy” disease-causing lifestyles into ones that include exercise and healthy diets,and refrain from smoking.
India’s increasing affluence is resulting in the same lifestyles: Indians walk less,eat more processed foods,smoke increasingly more,and are consequently becoming obese,stressed out,and vulnerable to diabetes and cardiac-related
issues. It may be premature to provide incentives like the US is planning; it may be better to begin with educating people about the correlation between lifestyle and disease.
Thirdly,the US is being forced to increase technological use to reduce costs. India’s industry benefits from these technologies already existing today; it does not have to wait for their development like the US did. We should immediately implement technology for claims processing,plan administration,electronic medical and health records,and so on. Each of these will increase efficiency,improve quality,and decrease cost.
Then there is the question of how much beneficiaries should pay. Most US insurance plans require them to pay a deductible as well as a co-payment. This reduces unnecessary consumption and reduces fraud. Products in India are “cashless”: consumers pay nothing. Though in reality they may end up paying for the entire procedure if the insurance benefit is capped or denied. India should create products that require deductibles and co-payments,forcing the consumer to stay aware of the costs and prevent hospitals from charging more from the insured than from those paying out-of-pocket.
Fifthly,there are lessons to learn on pay structures. One of the problems America is trying to fix is its “pay-for-service” model in which physicians are paid by the quantity and complexity of the services provided — incentivising prescribing more and more services even when there may be better,lower-cost treatments. The US is now moving to a more balanced combination of pay-for-service combined with pay-for-outcomes.
India is only just beginning to define treatment guidelines for
different conditions. Absent these,the same condition can cost significantly varying amounts in different hospitals. India has to come up with a consistent way to pay for service — but it should be thinking simultaneously of the pay for outcomes model.
Overall,India’s health insurance industry is just starting out. There is much to learn from the US debate.
The writer is an expert on the health insurance sector. She is
based in New Delhi express@expressindia.com
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