In 2008, the Centre for Emerging Markets Solutions (CEMS) and ACCESS Health decided to work together to research the healthcare market in India. This article provides an overview of recent developments in the health insurance programmes in India, where the coverage has increased from 4% to 20% of the population in less than five years. This article also outlines initiatives carried out by CEMS and ACCESS Health.
Healthcare: The Challenges in India
Quality of Services and Expenditures
Nearly 80% of outpatient healthcare and more than 50% of hospital care in India is provided by the private sector. For patients, this is generally an out-of-pocket expense, to an extent where many have had to sell assets and take loans to finance hospitalisations. Besides cost, an additional problem is that outpatient services are mainly provided by fragmented and unregulated healthcare providers, many of them in the informal sector with limited or no formal training in healthcare. India would have one of the highest numbers of healthcare workers per capita in the world, if the informal providers are taken into account. However, the quality of health services is a major concern, with over-prescription of antibiotics, use of steroids and delayed referrals, being serious issues that are commonly encountered.
Good Practices, but Limited Scope
India is also home to a unique pool of entrepreneurs who have developed processes for high quality and low-cost care. These healthcare providers have developed their own cadres of professionals and para-professionals to perform specific tasks after internal training. This has brought down cost and increased specialisation. As a result of these innovative practices, major improvements in health outcomes have been documented in maternal and child health, eye care, cardiology and also primary healthcare. However, only a fraction of the population has access to these healthcare providers. Majority of the care is still provided by the highly fragmented and unregulated healthcare providers.
One of the main issues characterising the healthcare market is information asymmetry. Patients are ill-equipped to judge the providers based on the quality of services, and prices are rarely transparent. It is hard to ensure value for money and compare the healthcare providers. Over-investigations and over-treatments are prevalent. The Government of India has limited information about the quality of care provided in the public sector and hardly any information about the private sector, where most people are treated. This issue is important because information asymmetry leads to market failure, which means that the services of highest quality and best price are not competitive because patients do not have sufficient information to make informed decisions. This is certainly the case in India, which is characterised by an unregulated market.
New Insurance Schemes Emerge
The government must incentivise the provision of quality healthcare and penalise behaviour that leads to poor quality of services. Enforcing regulation is a challenge in India but strategic purchasing and effective management of information can address many issues that regulation fails to address. In the last four years, large-scale insurance schemes have been unveiled in India. One such example is the Aarogyasri Health Insurance scheme in Andhra Pradesh, which has networked 241 private and 97 government hospitals to provide cashless treatment of 938 hospital procedures for more than 70 million people. This makes it one of the largest health insurance programmes in the world. The government pays the premium of R439 per family per year and there is no co-payment by the families. The government believes that the administration cost to collect premium would not make it feasible as of now.
The awareness of this scheme is high. We surveyed 534 households in the low-income areas of coastal Andhra Pradesh and reported 100% awareness and appreciation of the scheme. Thus far, about 4.5 million people have been screened at health camps that all networked hospitals have to provide every week, in locations decided by the government. More than one million people have been treated under the scheme since its inception in 2007.
This new platform provides opportunities for the government to serve as a strategic purchaser of services monitor the quality of care and address issues of information asymmetries. Some measures have been taken to impact the providers – more than 70 hospitals have been delisted and barred from being reimbursed by the government after they were found to have inconsistencies. However, there remains a lot to do in terms of standardising and improving the quality of care through this platform.
Critique and Opportunities
There are ongoing debates about the issues and opportunities with these schemes.
Some criticism is pointed towards the increased public spending on tertiary hospital care while most of the burden of disease, for example, fever, diarrhoea, etc, has to be managed at the primary care level, which is not covered. This criticism is valid but it is important to recognise that many countries initiated health financing reforms by covering the costs of major surgeries in hospitals. The motivation has been to protect people against catastrophic expenditures. One other reason is that in-patient care is easier to monitor than primary care services. Thailand is an example of a country which has, over decades, developed coverage from hospital-based care and expanded to primary care and chronic disease management.
Enforcing regulation is a challenge in India but strategic purchasing and effective management of information can address many issues that regulation fails to address.
Criticism is also pointed towards the fact that hospital care represents a small part of healthcare expenditure. Most expenditure is incurred for outpatient care, in particular for medicine, which accounts for 82% of outpatient care expenditure. Researchers have suggested that the schemes that cover only hospital expenses, such as the new government-funded insurance schemes in India, will fail to protect the poor against impoverishment. Whilst these findings are important and should guide policy decisions, it is also important to look at the severity and implications of the expenditure – hospital care is what is said to have caused indebtedness and people to sell assets.
Government officials are also skeptical about the amount of funding being channeled to private healthcare providers, especially when the government has invested in infrastructure in government hospitals that is not used. Another problem is that students in government medical colleges need patients to work with and these new schemes are said to drive patients to private facilities. This is a valid concern. However, it must also be understood that one motivation behind the scheme was to improve the competitiveness of public hospitals. They are reimbursed the same rates as private hospitals for each procedure done. Salaries and infrastructure are already subsidised for public hospitals and they are supposed to use the additional income to make investments to improve their competitiveness. However, it is evident that many public hospitals have not been able to make effective use of this opportunity, one of the reasons being a lack of autonomy for the hospitals to hire or contract staff when needed.
People are also concerned about increased malpractice with hospital-induced demand for needless surgeries as a result of the emerging insurance schemes. This concern is extremely relevant as the government may be subsidising unnecessary treatments. As such, the government must build the capacity to use available data to improve and not worsen the quality of care. All the hospitals in the insurance network have to use an IT platform developed by the government. The data collected includes everything from videos of angiograms and x-ray films to details on the drugs used. Through this platform, the government also has access to information regarding the physician, the surgery performed, and the hospital where it was performed. Access to this information has provided the government an opportunity to do value-based purchasing of healthcare services, to curb malpractice, and incentivise improved quality of care with protocols for evidence-based treatments and rational drug use.
From this discussion, it is clear that the new schemes have given the government access to information that was previously not available to them and this can serve as a step to address issues of information asymmetries.
Work by CEMS and ACCESS Health
There is need for more evidence on the impact of the new insurance schemes. Currently, we are evaluating the Aarogyasri scheme to assess how effective it has been to meet the objectives of mitigating indebtedness due to healthcare expenditures. We are also assessing how use of healthcare has changed. One of the main areas of interest is how the government uses the data now available to address information asymmetries regarding quality and price of healthcare. We look at its implications and study the responses from the private and public healthcare providers in terms of investments and service provision.
Many low and middle-income countries are looking at health financing reforms because many governments have failed to deliver care through their own public system. The rigid and bureaucratic systems have not been able to motivate staff and improve efficiency in the delivery of services. Governments in emerging markets are now looking at means to purchase services from the growing private sector.
The government needs to access information about the available resources in the private and the public sector in order to design health financing reforms.
ACCESS Health works with eight countries, which are part of a Joint Learning Network1. These countries have introduced health financing reforms, where government purchases healthcare services from the public and private sectors. We organise learning programmes in these countries in areas such as the use of technology to improve transparency and on performance incentives to providers.
We are looking into the expertise that is needed to develop these systems in India. We have identified two critical areas: Access to information and capacity-building. The government needs to access information about the available resources in the private and the public sector in order to design health financing reforms. There is also a need to build capacity to become a strategic purchaser – a purchaser that contains costs and catalyses quality improvements in health services. This shift in government focus needs to be gradual as it requires new skills. Mistakes can result in more harm than good with malpractice and cost escalation. In this regard, we are working to provide information on public-private partnerships and training in health financing to the government and private sector.
The opportunity for improved quality and productivity of care through strategic purchasing by the government also requires support to providers. It is critical that management capacity is built among providers to respond to increased demand for more and better quality services. Reforms in health financing are often motivated to increase competition. However, there are examples where the demand for services rapidly increases with reform but the healthcare providers are not ready to meet the demand and quality standards. Management of healthcare facilities is a major issue. Even the larger private hospitals struggle with process management and inefficiencies. For example, the outpatient waiting time for a consultation is often four to six hours. This same time frame applies to the discharge time, which is the amount of time taken after the doctor has seen the patient until the papers are in order and the patient actually leaves.
We are working with hospital teams to build their process-management capacity. We introduce process improvement programmes and continuously measure the performance. The objective is to build capacity of these teams and also to generate evidence on process improvement initiatives in hospitals. The evidence and data should later inform purchasers of healthcare services, such as the insurance schemes to develop performance incentives.
There are many questions regarding the future of the emerging, publicly-funded health insurance programmes in India. We believe the government can improve access to care through strategic purchasing of services from private and public providers. We also believe there is an opportunity to catalyse quality improvements and cost-containment by addressing the issues of information asymmetries. This work has started at the tertiary level of care but we must continue to experiment to address the huge need for quality primary care services. This is a universal problem but with the use of technology and a willingness to experiment, India has an opportunity to develop world-class solutions.