Health Financing/Insurance

Finally, a lifeline for India’s poor

Nothing causes as much anxiety in a family as when someone falls sick. Nearly 65% of India’s poor get into debt and 1% fall below the poverty line each year because of illness, according to National Sample Survey Organisation (NSSO) 2004. The answer, of course, is health insurance, but only 6% of India’s workers have it. Free public hospitals are not an option as two out of five doctors are absent, and there is a 50% chance of receiving the wrong treatment, according Jishnu Das and Jeffrey Hammer’s study. This tragic state of affairs is, however, set to change dramatically with Rashtriya Swasthya Bima Yojana (RSBY), a visionary national health insurance scheme, which provides INR 30,000 ‘in patient’ health benefits at a premium of INR 600, which the government pays if you are poor. A brainchild of an IAS officer, Anil Swarup, this scheme will succeed when others have failed because of choice, competition and a magical ‘smart card’. A patient can choose from almost 1,000 private or government hospitals. States can choose from 18 public or private insurance companies. Insurers have the incentive to recruit the poor as they earn premiums by doing so. Hospitals will not turn away the poor because they don’t want to lose the INR 30,000 in potential revenue. The poor have a choice to exit a bad hospital, something that only the rich can do today. Competition between hospitals will improve the quality of healthcare and new hospitals will come up because there is now money in catering to the poor. The insured carry a smart card with a photo, fingerprints of the family, and an official’s ‘key’ who is accountable. It makes transactions cashless and paperless for the 725 pre-agreed medical procedures. This card contains INR 30,000 and it tracks expenses day to day in the hospital and the money is deducted automatically after each procedure. No need for pre-approval or reimbursement. Since the poor are migratory birds, the smart card empowers a Bihari to use a hospital in Gujarat. Smart cards are designed to prevent fraud because of 11 unique types of embedded software. So far 500,000 cards have been issued in six months covering 2.5 million people. Most states have agreed to the scheme because the centre foots 75% of the premia. Haryana and Gujarat are the most enthusiastic states. Uttarakhand and Orissa are dragging their feet. Kerala is offering it to everyone as long as the non-poor pay their own premia; thus, it has become a universal product of the insurance company. Only Madhya Pradesh and the North-East states, to their disgrace, have not joined. If all goes according to plan, 30 crore people or one third of India will be covered in five years at an annual cost of INR 4500 crores – a tiny sum compared to the money wasted in dozens of other schemes. Previous state health insurance schemes failed because they insisted that people use public hospitals and public insurers – with predictable results. This one will succeed because insurance companies, hospitals, and patients all have ‘skin in the game’. Smart cards can dramatically cut corruption in all our social programmes. India spends 14% of GDP in subsidies for the poor, which is more than enough to wipe out poverty. But poverty persists because subsidies leak out through corruption. Smart cards can also carry data on payments for rations (PDS) or earnings from employment schemes (National Rural Employment Guarantee Scheme) and it can expose corruption very quickly. Despite the Left’s strident rhetoric, middle class Indians do not resent income transfers to the poor as long as the benefits reach the poor. Our problems in India are of the ‘how’, not of the ‘what’. The smart card addresses the ‘how’, and we know it’s powerful because corrupt officials and politicians are trying hard to kill it.

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