Is Health Insurance the answer to India’s healthcare woes ?

Well thats the question I have been asking myself all these years. Now seriously, the only country that spends 17 % of its GDP on healthcare and is ranked among the best healthcare systems in the world providing care to more than 300 million people is the United States of America. And the healthcare system there is run by Health Insurance firms.

India on the other side spends far lower, it is estimated that we spend about 5.7 % of its GDP on Healthcare. Almost 75% of it is in the private sector. As a matter of fact almost 80% of outpatients, pharmaceutical spend and ambulatory care is covered by the private sector. When it comes to inpatient it is 50-50 % with government and the private sector sharing the spend. It is only in the primary care and preventive space that government bears almost 95% of the spend. All immunization programs for example are run by the government.

So where does that leave us ? Can we have a scenario that we continue to ignore secondary and tertiary care and focus on primary care ? That would be an option. But is there another way ? What about Health Insurance ?

This Sunday 12th March I had the opportunity to hear healthcare leaders at the inaugural Ayusmat  Healthcare Leadership Summit, 2017 organized by the IIM Bangalore General Management for Healthcare Executives (GMHE) 2016-17. While the event organization itself had a lot left to be desired, I thought the panel discussion on Primary: Healthcare Financing and Pricing in India – Affordability and Accessibility was a eye opener. In many ways the leaders on the panel felt that the best way out of India was to embrace Health Insurance.

Dr. Nandakumar Jairam Chairman Columbia Asia was the first to bring it out. He insisted that the lack of political will is the reason why government contributes only 1% to healthcare from the budget. The rest of the spend comes from private sector. And this leaves the only option of embracing health insurance. He also felt that the best way for the government to contribute is to invest its share in the health insurance construct. Though I was not clear on how he planned to achieve that but I believe that he probably felt a model like the Medicare Reimbursements that happen in the US healthcare systems, where the government pays healthcare providers for all the care provided to those that qualify under medicare.

Dr Mudit Saxena, CEO of Care Hospitals, felt that the current constraints placed on hospitals in the private sector are making sustainability of the private healthcare system nonviable. While the popular perception is that large hospitals make huge profits, the reality is that frequent changes in the regulatory policies was creating a lot of stress in the system. At the same time he believed that many of the new innovation in healthcare specially in areas like home health and Telemedicine are key to improving care. He also supported the move to get more health insurance into the country. He felt that the areas like TPA management could also help propagate insurance. The members should have the option to choose their TPA based on services provided and ratings just like how once can rate other service providers.

But the story of India when it comes to healthcare is the distinction between India and Bharat, urban and Rural areas. While the urban centers have access to adequate care, the rural areas suffer from classic cases of availability and affordability. Also though India started with a huge population of communicable diseases, today 60 % of the disease burden is non-communicable diseases.

Dr. B S Ajai Kumar, Chaiman HCG Hospitals spoke of the lack of incentive of the government to raise the GDP levels and then contribute more of that to the healthcare sector. Instead he felt the government was making money through the private healthcare players through taxes and other charges. Why provide people with Rs 1 per kilo Rice and empty the exchequer on such programs he wondered ? And as 80% of healthcare is mostly private that makes a big revenue stream for the government. This is despite the fact that India is one of the cheapest destinations for healthcare procedures. This is the reason why so many medical tourists come to India. They have high quality procedures performed at lower prices. Dr Ajai also felt that the low prices could be the reason why Health Insurance was not popular in India. As most rich people could afford the procedures, they don’t feel it is wise to invest in a health insurance policy. So somewhere the mindset has to change for making health insurance more mainstream

Also somewhere the viability of the health insurance industry would depend upon expanding the base of the members. As the member base has not grown, premiums keep rising year on year on the existing members making it very difficult to sustain the industry. The private sector has already invested almost $ 3 Billion in the healthcare sector in India. and the cost of adding one bed in a multi specialty hospital is Rs 1.3 Crores. While the pricing per bed is much lower so it takes a very long time to recover the investments. That’s the reason most investments have been made is 100 bed, single specialty hospitals covering areas like Ophthalmology, Dentistry, Oncology and Child and mother care. Vishal Bali Chairman Medwell Ventures, echoed the sentiments as did Sashank ND, founder of Practo.

The one thing apart from Health Insurance that all the speakers agreed on was the futility of Drug Price Control Orders (DPCO). The speakers felt that due to DPCO, certain healthcare devices and medicines would just disappear from India. There would be no incentive to device companies and Pharmaceutical companies to invest in R & D. Also they felt cross subsidy would be affected in India thanks to DPCO. If a patient is willing to pay for a bio degradable stent for example, he or she should be allowed to do that. Controlling prices will make the industry non competitive and then they would invest only in generics and cheaper devices.

In conclusion my opinion on this topic is

  1. Yes Health Insurance is a important aspect of healthcare. I would recommend all to look at health Insurance policies, I have one from Max Bupa. I hear Apollo Munich is good too
  2. I hear this argument for Universal Healthcare. But who will pay for it  ? Almost 17 % of our budget goes to defense. Maybe Universal Care is only possible once we have reduced the tensions long our western and eastern borders, but that would be a long term plan and there is no immediate opportunity to cut the defense budget.
  3. Health Insurance has many other effects including the opportunity to create Electronic Health Records. This may help us in applying technologies like analytics on them to improve care outcomes.
  4. Health Insurance may increase the prices in the healthcare system. It may not directly affect us now but in the future the government would have to create a robust structure to watch the insurance firms to ensure that there is no malpractice and to keep in check instances of fraud.


But I would like to hear your views on this topic. Do you have health Insurance ? If yes why and if not, then why not ? What is your perspective on this topic. Would love to hear them.

Dr. Vikram Venkateswaran

Management Thinker, Marketer, Healthcare Professional Communicator and Ideation exponent

This Post Has One Comment

  1. Kiten Meena

    Nicely summarize. Great article Vikram. Government has to play role in healthcare to regulate it, no doubt. They may not have to pay for it, “nothing comes for free”, if it comes it is not valued enough. Whether it is education or healthcare – I agree that we should pay our fair share. Government should provide encouragement, by tax break (which we have) to ensure private insurance is used in effective manner and raise the cost of healthcare. Cost of healthcare will only be raised if people started abusing the health insurance or the hospitals and physicians raise prices to be in their interest. Government subsidies for poor and needy does seems appropriate specially in rural areas for preventive care and long term care management.

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