Private Hospitals Find Modi’s Health Insurance Pricing Unviable

Calling the pricing unviable, private hospitals threatened to stay away from the Prime Minister's health insurance scheme that will cover more than half-a-billion Indians.

The Indian Medical Association, a doctors' lobby that agreed to bring small and medium hospitals on board, said the rates of medical procedures under the scheme were “unscientific, non-viable and will compromise on patient safety”, according to a June 22 letter to NITI Aayog. The prices calculated by the association were up to 84 percent higher than what the government fixed.

“The existing package rates are at least 25 percent lower than even the break-even point for small and medium hospitals,” said Dr. RV Asokan, chairman at IMA Hospital Board of India that represents small hospitals. “If hospitals are to provide treatment at such unsustainable rates, they will end up shutting shop because of losses,” he said, adding that cost calculation needs to be transparent.

Participation of private hospitals is vital for the Pradhan Mantri Jan Arogya Yojana. That's because half the households in the country, according to the National Family Health Survey published in July last year, don't use state-run facilities because of poor access and quality. Moreover, India has one government doctor for every 11,082 people, according to the National Health Profile. That compares with the World Health Organization's suggested ratio of 1:1,000.

Prime Minister Modi, in his Independence Day speech, announced the rollout from Sept. 25 to cover at least 10 crore families for Rs 5 lakh a year each. More than 8,800 hospitals have already expressed interest, according to Indu Bhushan, chief executive officer of the National Health Agency, the implementing authority. Nearly half of them, he said, are private.

Ravi Wankhedkar, national president of Indian Medical Association, countered that. They are purely expressions of interest, he said. “These are not conclusive and unless the issue of low package rates is resolved, no private hospital is likely to come on board.”

The association, which represents 33,000 hospitals across the country—including 15,000 small and medium—said a team should be constituted to fix costs of at least 150 common medical procedures. Low rates, according to IMA, would lead to poor quality of healthcare as hospitals would cut costs to break even.

‘No Time' To Study Costs

The IMA and the government, Wankhedkar said, had agreed that two representatives from the association will assist the Department of Health Research to form a consultative pricing group led by the NITI Aayog—which designed the scheme.

But no cost study was carried out. “We are really stretched in terms of rolling out the scheme and such a study can't be done before the implementation begins,” Bhushan said. A comprehensive analysis of rates will be done in December-January, according to Bhushan, as it will take time to agree on a methodology, collect relevant data and discuss it.

The existing prices of 400 most-used medical packages fixed by NITI Aayog are based on Directorate General of Health Services' analysis of insurance programmes offered by states, according to Bhushan. The pricing, he said, will vary with states, which have the freedom to revise them.

Yet, lack of a consultative approach has led to confusion and ambiguity, according to Girdhar Gyani, director general at Association of Healthcare Providers (India), which represents 40,700 large and about 8,000 small and medium hospitals. There is lack of clarity on claim settlement and even the rollout date, he said.

‘Underfunded'

The government has allocated Rs 2,000 crore for 2018-19. “A scheme envisaging Rs 5 lakh coverage for 50 crore people should have at least Rs 1,16,000 crore allotted for adequate capitalisation. Only Rs 10,000-12,000 crore are expected to be the fund allotment,” IMA said in a dossier outlining its concerns. “Such gross underfunding will lead to a collapse of the scheme itself.”

India's public expenditure on health is about 1 percent of its GDP, compared to the 1.4 percent spent by low-income countries and also below the global average of 5.9 percent, according to the World Health Organization's Global Health Expenditure Database. The nation's private sector contributes almost 74 per cent of this expenditure, according to a report by India Brand Equity Foundation citing RNCOS, Grant Thornton, LSI Financial Services and OECD. Without the participation of private hospitals, the prime minister's scheme won't be as effective.

“If the prime minister's scheme has to run through public hospitals, which already provide free healthcare, what is the need of a universal insurance scheme in the first place?” Gyani asked.  “I don't think that any private hospital would formally sign up even by Sept. 25, the official launch date.”