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Consumer Concerns in Health Security/Insurance Schemes in India. Sukumar Vellakkal, PhD Health Economist & Adj Assistant Professor, SANCD, PHFI Background. India: Towards Universal Healthcare coverage

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Consumer concerns in health security insurance schemes in india

Consumer Concerns in Health Security/Insurance Schemes in India

Sukumar Vellakkal, PhD

Health Economist & Adj Assistant Professor,


Background India

  • India: Towards Universal Healthcare coverage

  • Healthcare schemes:with the objectives to access to good quality healthcare at secondary and tertiary level(private) at no out-of-pocket financial burden at the time of needing care.

  • Examples:

  • i) CGHS, ECHS, ESI, Railway health scheme etc;

  • ii) RSBY, Arogyasree (AP), Kalaignar scheme (TN), Vajpayee scheme (KA) etc

  • Iii) Private health insurance schemes

  • Healthcare delivery: Buying secondary and tertiary healthcare for beneficiaries from private providers

  • How healthcare providers are contracted and how do healthcare providers get paid? What are the likely impacts on consumer’s welfare?

Where beneficiaries stand demand models for healthcare
Where beneficiaries stand: Demand models for healthcare India

3 Models:

1. The neo-classical model (the standard economic model of consumer behaviour): Consumer demand is determined by utility maximization subject to a budget constraint

2. The medico-technical model :

Consumer demand is determined by medical experts based on objective needs

3. The imperfect agency model (Mix of both) :

Consumer demand is partly consumer-initiated and partly provider-initiated

India: Consumers are less empowered

  • just in deciding whether to seek care and from where etc…but thereafter it is completely Medicos model

  • Moral hazard: More of supplier induced in nature than demand induced

Major provider payment mechanisms
Major Provider Payment Mechanisms India

  • Fee for service, Capitation, Case based (DRGs)

  • Fee for service Vs. package rates

  • Unscientifically fixed

  • Fixing provider payment mechanisms in India: 3 examples:

  • 1) CGHS-ECHS etc

  • 2. RSBY and similar state schemes

  • 3. Private health insurance

1 provider payment in cghs and echs
1. Provider payment in CGHS and ECHS India

  • Open bidding from healthcare providers for more than 1000 healthcare services/procedures

  • Same rates for certain services across small and large (specialty) hospitals

  • Some healthcare providers are unsatisfied with this rates.

  • Potential problems: Denial of care, low quality healthcare services, over provision since no monitoring, out-of-pocket expenditure

Impacts of cghs echs package rates on consumers
Impacts of CGHS-ECHS package rates on consumers India

  • ICRIER study by Vellakkal et al (2010):

  • 1. Denial of access to healthcare in some hospitals, especially in emergencies

  • 2. : A) 42 % of the patients incurred out-of-pocket expenses B) Proportion of out of pocket expenditure to total health expenditure was 30%

2 in rsby and similar state schemes
2. In RSBY and similar state schemes India

  • Same package rates across rural and urban & secondary and super specialty hospitals & public and private healthcare

  • Dis-empanelment by some hospitals

  • Denial of care by large hospitals

    (Selection of patients for treatment only for select services that have higher package rates...

    Agrees to provide all services in MoU but behave otherwise in mechanisms to monitor)

3 private health insurance
3. Private health insurance India

  • TPAs on behalf of insurers bargain with hospitals

  • TPAs are in align with the interest of insurance companies and hospitals than consumers

  • Vellakkal (2011): Based on a comparison between insured and uninsured patients, study found that Private health insurance results in

  • i) higher health expenditure &

  • ii) reduced length of hospitalization days in India

Major concerns
Major concerns India

  • Healthcare market is underdeveloped and highly unregulated

  • No criteria for pricing healthcare services

  • No benchmark for provision of care

  • Ambiguity in the definition of healthcare services/packages

  • Grading of healthcare providers: Difficult to distinguish different levels of healthcare provider or quality of healthcare services (NABH & NABL is just accrediting agency only)

  • Out of pocket expenses, Poor quality of healthcare & Denial of healthcare, Over (unnecessary) provision of care

  • Cost escalation in the health sector: Uninsured also will be affected

Policy steps
Policy Steps India

  • Move for more scientific way of fixing the price healthcare services by including all stakeholders and experts

  • Quantity and quality of services must be clearly defined with package rates

  • Develop standardized treatment protocol

  • Grading of healthcare providers based on quality of services and Quality assurance

  • Transparency and consumer empowerment