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From 'right to health' to 'right to health insurance'?

The government’s move to scale up and subsidise community health insurance schemes while doing nothing to improve healthcare service delivery is a flawed strategy. It’s like getting PDS shops to distribute mango kernels and mahua seeds as drought relief instead of foodgrains since the poor survive on these anyway, says Oommen C Kurian

community health insurance schemes

The raging debate in the US regarding universal healthcare coverage clearly demonstrates the power wielded by insurance companies and the healthcare industry and, indeed, their grand show of solidarity against any healthcare reform with the word ‘public’ attached to it. So much so that even Barack Obama, who normally handles the private sector with kid-gloves, was pushed into saying that his was a country being held hostage by the insurance industry(1). Apart from the misinformation enveloping the whole debate, one interesting aspect is how neoliberal policy wisdom has survived the recession and the contrary evidence that accompanied it. The dogma stands: Any government intervention has to be essentially bad, and the private sector, left alone, works the best.  

While the US health sector is distinctly different from the Indian one, this situation gives us a context to discuss the focused policy attention that insurance-based models have been receiving of late in India.  A closely-linked issue is the emergence of a ‘benign’ private sector in health policy documents –with the ability and willingness to serve the interests of the poor. We will discuss whether the shift towards insurance-based solutions and the expanded role assigned to the private sector could be two somewhat interrelated developments.  

It is widely recognised that the well-being of the poor is greatly influenced by consumption of public services.(2) In societies like India with high levels of exclusion, mere delivery of services may not be enough; it has to be guaranteed that they are available for free. Any charges, even if they are small or indirect, would mean a stark reduction in disposable income available with the poor for other basic needs like food.  

Public health spending as a proportion of GDP in India was at 1.6% in the mid-‘80s.(3)  Around the same time, the World Bank opined that treating healthcare as a right of citizens and providing free universal care does not usually work in low income countries.(4) The usual argument against raising the proportion of public health spending further relied on the difficulty of raising tax revenue. Typically, one resorted to pro-poor rationalisations for being anti-poor. It was even claimed that a higher public health spending is inferior to insurance solutions because ‘’it would be perverse to advocate making the poor still poorer by taxation’’.(5)

The era of ‘reform’ that followed saw India’s public health spending stagnating at under 1% of GDP. The notion of selectivity came to dominate the health sector, and almost all initiatives became restrictively targeted. Under-financing and neglect led inevitably to people being forced to approach the private sector for care, marking sharp declines in the numbers visiting government hospitals(6). The ushering in of market principles and commercialisation carried on under the guise of private sector ‘participation’. A substantial part of government action has been by means of offering tax exemptions, soft loans and large subsidies to private and non-state players in the health sector(7).  

Understandably, out-of-pocket payment in India is more than 80% of total health expenditure. A study in 2006 showed that while per capita income grew at 3.76% per annum, private health expenditure(8) grew at the rate of 10.88% per annum(9). Many low-income groups had negative real income growth in the same period, and vulnerability to ill health is higher as one grows poorer. Hence, for the poor, the situation is much worse than the general statistics suggest.  

User fees were introduced in public hospitals for cost recovery. Empirical evidence soon emerged proving the adverse effect it had on access(10) . Globally, the relegation of user fees into a 'necessary evil' shifted the focus to various pre-payment ‘innovations’.  An influential report in 2007 titled ‘Business of Health in Africa’ by an arm of the World Bank directed that public and donor funds to low income countries should be channelled mostly through the private sector. The Commissions of Macro Economics and Health have been major movers of this shift globally, as also the WHO, the World Bank and indeed the private sector itself, represented by institutions such as the Bill and Melinda Gates Foundation. Thus, private sector engagement has become one of the main health policy insistences(as opposed to technical and policy assistance) in many low income countries.  

A renewed interest in insurance followed, despite the fact that the last decade has been a period of ‘spectacular buoyancy’ in terms of tax revenues(11). Between 2001 and 2007, Tax GDP ratio rose from 8% to 12%. Interestingly, the rationale behind the introduction of insurance solutions now was not the ‘anti-poor nature of taxation’, but that out-of-pocket expenses are very high and it is ‘‘evident that the poorest bear the brunt of it’’!. Nobody seemed to discuss the reasons why the private sector dominated the health sector the way it did.  

The main reason for the popularity of insurance-based solutions in healthcare is their perfect harmony with policies of private-sector-led public health. For example, these schemes are mostly agnostic about the nature of the providers –- making the scope for private 'participation' manifestly higher. This is in perfect accordance with the gradual shift of the government from being a provider of services to being a financier. More important is the parallel development where the state is using strategies of privatisation, auctioning off and contracting out of public healthcare facilities so as to minimise its own presence in the health sector.  In short, these models are compatible with the ideology of the so-called reforms in a variety of ways: 

1. These schemes do not require public providers. The responsibility of the government ends when the insurance premium of the identifiable ‘vulnerable’ is subsidised.
2. They cover only in-patient treatment and ignore out-patient care completely, although out-patient care is often the major reason for indebtedness. 
3. The process of rationing becomes more convenient. The benefit packages are often extremely narrowly defined and there is always an upper limit to health expenditure which is, in fact, kept very low, beyond which nothing is reimbursed. Added to this is the case of rejections.
4. Many diseases and conditions that are prevalent are excluded by design, thus narrowing the scope further. For example, childbirth or pregnancy-related illness. Or any pre-existing illnesses.
5. It is easy to exclude people or groups from benefiting from the scheme as access could easily be made conditional. Senior citizens are a case in point, again in perfect harmony with the utilitarian intent of contemporary health policy. Old people do not offer ‘value for money’. The same is the case often with poor people with no BPL cards. Or those who cannot pay the premium.
6. The government can even wash its hands of the troublesome procedure of ‘identifying the poor’ for the highly selective scheme, as it becomes the implementing agency’s obligation. The very narrow definition of ‘poor’ itself impedes access.

Community health insurance schemes in India were primarily responses to a non-existent or unsatisfactory state presence. These were initiatives where community members tried to muster whatever resources they could to overcome the utter lack of healthcare services, a felt need. In that sense, these schemes must be seen as communities’ coping strategy necessitated by the failure of the state to fulfil its duties. A more recent reason for their proliferation, however, is the active encouragement of the state itself, through heavy subsidies. A task force of the government states: “The National Rural Health Mission (NRHM) is trying to carry out fundamental reforms in the basic healthcare delivery system in order to meet people’s needs. Exploring new healthcare financing mechanisms and developing credible community-based health insurance schemes is its mandate”(13). Now, a coping strategy limited to the extreme in its scope, which at best should have a complementary role, becoming a mainstay of health policy is problematic.  

The protections these schemes offer are admittedly narrow, limited and largely inadequate. When the state promotes these, scales them up, chooses to subsidise them heavily, or introduces large insurance-based programmes of a similar nature while, at the same time, abdicating its responsibilities of service delivery,  it has to be seen as  a flawed -- if conscious -- strategy. It is somewhat akin to getting the PDS shops to distribute mango kernels, mahua seeds and tamarind seeds as drought relief instead of foodgrains, since large numbers of the poor of our country are known to be surviving on them in any case. 

A reappraisal of the role of the state has happened -- from universalism to non-governmentalism, mixed with a means-tested system of care. The state is increasingly shifting from being the major provider of services to financier for a minority of the poor for a selected and very limited set of needs.  International agencies pushing such strategies have always been quick to appropriate concepts and slogans from people’s movements worldwide and free them of their ‘malignant’ property. In an act of extreme irony, community insurance solutions are being promoted very aggressively by governments – the state is placing the onus of people’s health back in their own hands, or more correctly, their pockets.

However, Indian policy documents categorically state that “health insurance is not a substitute for a well-functioning, effective and efficient public healthcare system”(14) and suggest  strengthening and participation of government hospitals. But in reality, the rolling out of such subsidised schemes happens side-by-side with contracting out or auctioning of public healthcare facilities. The National Health Policy states: “The state would encourage the handing over of public health service outlets at any level for management by NGOs and other institutions of civil society, on an ‘as-is-where-is’ basis, along with the normative funds earmarked for such institutions”(15).   

Interestingly, cost containment has been an implicit condition in most of these arrangements. For example, while primary health centres (PHCs) are contracted, the government insists that only those organisations willing to run the facility at 75% cost would be considered.(16) Health policy seems to value even self-defeating cost-effectiveness more than evidence, since the primary goal of a public health system seems not to be expanding access any more, but minimising its own costs and, often, size. Increasingly, transitional approaches that were to be complementary to a strong public sector are threatening to supplant it altogether.  

The fascinating part, however, is the interplay of three factors in the countryside -– introduction and active promotion of health insurance by the state, retreat of the state  from public provision and the articulated hope of the top-level policymakers that health insurance will be able to lure the private sector into the rural areas bringing equity. This logic of ‘equity by serendipity’  is fairly representative of our policy thinking -- the subsidies would make the rural ‘market’ attractive for the private entrepreneurs, and their willingness to open up new hospitals to tap this ‘market’ would balance the iniquitous urban-rural divide.(17) Rashtriya Swasthya Bima Yojana (RSBY) guidelines state that the insurance company, partnering with local NGOs, would be the implementing agency. The state is thus willingly painting itself into a corner, counting money to be handed out to the private sector. A look at the number of hospitals registered under this scheme is revealing. As of August 2009, of the 1,428 hospitals in 371 districts that got registered, 1,122 are private.(18)   

The myth of a two-pronged strategy where private sector engagement complements an expansion of the public sector is quite evident. For example, the Tenth Five-Year Plan period (2002-2007), which was also a time when insurance schemes as well as public-private partnerships (PPPs) proliferated with active state backing, saw the number of PHCs in the country  falling to 22,370 in 2007, from 22,875 in 2002. This number is inclusive of the PHCs that have been auctioned out to various non-state players; if they are excluded the fall would be steeper.  

Calculated at 2001 census figures, our system is short of 20,855 sub-centres, 4,833 PHCs and 2,525 community health centres (CHCs). This is, in fact, a substantial underestimate, since we have used the number of centres as of 2007, and the population as of 2001. As much of the money allotted to NRHM is used up on recurring costs of staff salaries in selective disease programmes, various so-called innovations, targeted interventions and PPPs, instead of on strengthening PHC infrastructure and extending access, the situation is only going to worsen. The imagined constraints of the government and the need for new facilities together facilitate an expansion of the private sector in health, while the NRHM promise of 3% of GDP as the outlay on health remains as faraway as ever. 

The focus on insurance in its current form, however, is based on the false assumption that in-patient care causes more impoverishment. Data from the 60th round of the National Sample Survey Organisation (NSSO) suggest that impoverishment due to out-patient care is greater than that due to in-patient care. Focus on high-cost, low-probability events may not be sufficient to address the impoverishing effect of health spending. Regarding the potential risks involved, it is further observed that “health insurance requires availability of good quality healthcare provision. In the absence of strong presence of standardised healthcare, health insurance is vulnerable to abuse and cost escalation.” (19) Nevertheless, it is often seen that many policymakers are informed and often driven by copious amounts of hope -- much more than what robust health policy can possibly handle. For example, the problem of fraud is to be taken care of by the ‘competition’ between hospitals –- with poor patients identifying ‘rotten apples’ and staying away from them!(20)

There have been many well-informed pleas from various quarters to exercise restraint in recommending the scaling up of insurance solutions without studying them enough, considering potential policy pitfalls.(21) But these requests seemingly have had no effect on the general enthusiasm. Insurance schemes that the government is rolling out have borrowed heavily from various community-based schemes; from the designs and arrangements with private insurance companies to the benefit packages. It is obvious that they share their limitations, too.  Moreover, in low-income countries, where the informal sector dominates, even social health insurance (SHI) may not be a viable option. It has also been observed that countries with SHI models of funding have less comprehensive national public health activities than those with tax-funded systems. In countries with a high communicable disease burden, this could prove to be fatal. Add the fact that, with infinitely more favourable conditions, Germany took almost 100 years to achieve universal coverage.(22) 

Identifying many small groups of the ultra-vulnerable through defective methodology(23) across the country and calling them risk pools, and watching over separate programmes on perpetual policy ventilators will not solve India’s public health problems. It is exceedingly clear that we need to have a system based on a much larger ‘risk pool’.  

Thankfully, we already have such a system, though it is far from perfect. But we do have it. It is called tax-financed public system, the most common and most equitable risk-pooling mechanism in operation in the world. It could function as the best means of solidarity and redistribution whereby the ill and the poor are cross-subsidised by the healthy and the rich. We need to address the glaring inadequacies vis-à-vis its size, quality, staff shortages, and its ability to absorb funds. But to believe that we can achieve universal coverage without investing substantially in our public hospitals would be ahistorical and unfair. And it would also be bad public health.  

(Oommen C. Kurian is a PhD student at the Centre of Social Medicine and Community Health, Jawaharlal Nehru University, New Delhi) 


Thanks to Prof Mohan Rao for his comments and help. 


[1], Accessed on 28th August 2009. 

[2] Ferroni, Marco A and Kanbur, Ravi (1991) cited in Paloni, Alberto and Zanardi, Maurizio (2006) The IMF, World Bank and Policy Reform, Routledge, London. 

[3] Duggal, Ravi (2006), Why Budgets are Important?, CEHAT, Mumbai,  Accessed at brief.pdf on 27th August 2009.

[4] Akin, John S et al(1987), Financing Health Services in Developing Countries: An Agenda for Reform, World Bank, Washington.

[5] Abel-Smith, Brian (1986), Funding health for all - is insurance the answer?,  World Health Forum Vol. 7 , P. 4.

[6] Duggal, Ravi (2006) op cit.

[7] Duggal, Ravi (1997), Health care budgets in a changing political economy,Economic and Political Weekly.

[8] Private health expenditure in India is almost equal to out of pocket payments, since private insurance coverage is negligibly small.

[9] Bhat, Ramesh and Jain, Nishant (2006), Analysis of Public and Private Healthcare Expenditures, Economic and Political Weekly.

[10] For a discussion see Save the Children (2005), An Unnecessary Evil? User Fees for Healthcare in Low-income Countries, London.

[11] Rao ,Govinda,M (2007), Fiscal Adjustment: Rhetoric and Reality, Economic and Political Weekly.

[12] Swarup, Anil (2009), Rashtriya Swasthya Bima Yojana, IRDA Journal, August.

[13] National Rural Health Mission (2005), Report of Task Force on Exploring New Health Financing Mechanisms, MoHFW, New Delhi.

[14], Accessed on 27th August 2009.

[15], accessed on 27th August 2009.

[16], accessed on August 27, 2009.

[17] Swarup, Anil and Devadasan, N (2008), Rashtriya Swasthya Bima Yojana: An Overview,  Health Action,  May.

[18] Accessed on August 28, 2009.

[19] Berman, Peter and Ahuja, Rajeev (2008), Increased Health Care Spending in India: Opportunities and Risks, Health for the Millions, Vol. 33, No. 6.

[20] Swarup, Anil (2009), op cit.

[21] Narayana D, (2005), Scaling Up Social Health Insurance without Analysis?, Economic and Political Weekly, November 19, , pp 4954-55, , Vyasulu, Vinod (2008), The Case against Health Insurance, Economic and Political Weekly. Ray, Amit Shovan (2008), Financing of health care in India: issues and Concerns, Health for the Millions, Vol. 33, No. 6, Duggal, Ravi (2006), Need to Universalise Social Security, Economic and Political Weekly, August 12,  pp 3495-97 and Sankaran, TS (2006) Can the Best Be the Enemy of Good, If the Good Is Not Good Enough?, Economic and Political Weekly, August 12,  pp 3491-95.

[22] For a very useful discussion on the relevance of health insurance for low income countries, please see Oxfam (2008), Health insurance in low-income countries: Where is the evidence that it works?, Joint NGO Briefing Paper, , UK.

[23] Exclusion as well as inclusion errors galore, thus defeating the purpose of targeting in the first place.

Infochange News & Features, September 2009