Health Insurance as a Healthcare Financing Mechanism in India: Key Strategic Insights and a Business Model Perspective
The urgent call for a sustainable health system, characterized by the delivery of high-quality care while keeping the cost of that care’s provision reasonably low across the world, is not a recent phenomenon. It had been argued that if nations’ health systems are not changed, it will lead to a health disaster and make the health system unsustainable. Globally, multiple visible trends can derail the healthcare initiatives and push the health system towards unsustainability. A failed attempt to address these threats and challenges will create huge financial burdens for both individual countries and the citizens living in them. The factors such as focusing on input-based financing and volume rather than value, changing demographic and lifestyle trends, increasing public health emergencies, and high medical inflation burden the health systems. Unless these factors are addressed, health systems are likely to become further unsustainable in future. In India too, some of these trends can be seen. For example, hospitals are paid based on input or services delivered. Though some forms of value-based payments exist, their implementation is limited. During the financial year 2018–2019, the medical inflation stood at 7.14%, almost double the general consumer price index. Now, this may create a substantial financial burden for both individuals and governments. One possible way to manage the financial burden from healthcare is through risk transfer and using health insurance as a healthcare financing mechanism.
While examining the financing of healthcare through the insurance mechanism, it is essential to investigate the overall disease burden and the healthcare sector in India. India’s healthcare disease burden broadly comprises communicable and non-communicable diseases. Most public healthcare facilities are geared towards managing communicable diseases, such as HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome), flu, tuberculosis, measles, hepatitis A and B, Ebola, etc. The recent 2019-nCov also falls in this list of communicable diseases. In addition to managing communicable diseases, the public sector healthcare delivery is also geared towards managing maternal and child health across the country. Concerning non-communicable diseases, the major ones are diabetes, hypertension, heart diseases, cancer, leukaemia, osteoporosis, etc. Most of the private health sector resources and infrastructure are focused on providing treatment for non-communicable diseases. When it comes to the diseases like diabetes, India ranks third globally, with more than 77 million individuals suffering from diabetes in India.
As of 2016, the life expectancy at birth was 66.9 years for males and 70.3 years for females. Throughout 1990–2016, India underwent an epidemiological transition where the disease burden, in terms of the highest disability-adjusted life years (DALYs), shifted from communicable to non-communicable diseases. Diarrhoea and lower respiratory infections and cardiovascular and chronic respiratory diseases contribute to the maximum share of deaths in communicable and non-communicable diseases, respectively. Today, India faces a double disease burden. As per a World Health Organization (WHO) report, in the year 2017, just 32% of the healthcare spending came from public sources (World Health Organization, 2017). The government’s low spending on healthcare forces patients to reach out to private healthcare providers, increasing their out-of-pocket (OOP) spending. As per the Ministry of Finance, Government of India, from a financial perspective, India has one of the highest OOP levels globally, which is around 65%, contributing directly to the high incidence of catastrophic expenditures and poverty (Economic Survey, 2021).