The recently announced National Health Protection Scheme succeeds Rashtriya Swasthya Bima Yojana (RSBY), which provided health insurance for short-term hospital visits to the poorest 300 million Indians. Based on their large-scale study of RSBY in Karnataka, Malani and Kinnan put forth some important lessons for the new programme.
India’s Prime Minister, Narendra Modi, has just announced a bold new programme to provide government health insurance to its citizens. The new programme, called the National Health Protection Scheme (NHPS), will cover up to 500 million poor and near-poor Indians for up to Rs. 500,000 (US$7,785) in hospital expenses. Once rolled out, NHPS could become the largest government health insurance programme in the world, measured by number of households covered.
Modicare, as the programme is commonly called, is not India’s first public health insurance scheme. It succeeds Rastriya Swasthya Bima Yojana (RSBY), translated as the National Health Insurance Scheme, which provided health insurance for short-term hospital visits. It also builds upon a number of state schemes in Andhra Pradesh and Karnataka that cover longer-term hospital stays.
NHPS could be a game changer. It is over 15 times more generous than RSBY, which only covered Rs. 30,000 (US$467) in short-term hospital care, and is between 2-3 times more generous than state programmes for long-term hospital care. Whereas RSBY targeted just the poorest 300 million Indians, Modicare would cover an additional 200 million people. With an estimated 7% of India’s population pushed into poverty each year due to medical expenditures, the programme could provide an essential safety net for the poor.
But the programme will come at a significant cost. With insurance premiums estimated at Rs. 1,100-1,200 (US$18) per household per year, the full programme could cost up to Rs. 12,000 crore (US$1.87 billion). Like Medicaid, the US’s public health insurance programme for the poor, the costs are to be split between the central government and state governments. The central government is responsible for Rs. 7,000 crore of the total cost, Rs. 5,000 crore more than has been allocated in the current Union Budget.
With so much at stake, it is essential that India get the rollout of NHPS right. We are part of a research team that just finished a large-scale study of health insurance in the state of Karnataka. The core of the study was a randomised controlled trial (RCT) that examines the impact of RSBY on the health and financial security of roughly 50,000 Indians in that state1. We also conducted a study of hospitals in the state. One of us also heads a programme called International Innovation Corps which supported the Ministry of Health’s Suvarna Arogya Suraksha Trust in implementing RSBY in Karnataka, a state with 64 million residents. From these we have learned some important lessons for Modicare.
People must enrol in Modicare
No matter how generous the eligibility criteria and coverage of Modicare, it will have limited effect unless eligible households actually enrol in the programme. Its predecessor, RSBY, suffered low uptake rates. Although it costs participants just Rs. 30 (US$0.47) to enroll, only 54% of eligible families offered the insurance enrolled, lower than Medicaid take-up rates in the US.
By contrast, we were able to achieve 79% enrolment rates in our study when we offered households free insurance. While participants in our study were wealthier than typical RSBY households, our enrolment rates were 60%, above government levels, even when we sold insurance at cost (roughly Rs. 200, or US$3.15), with no government subsidy. We achieved this with an enrolment drive that went door to door to inform households that they were eligible for insurance and helped them enrol.
Certain states in India have also achieved similarly high enrolment rates. For example, the state of Chhattisgarh reports an 85% uptake rate for RSBY. Other state insurance programmes have achieved nearly 100% enrolment rates by automatically enrolling eligible patients at hospitals. So it is possible to achieve high uptake at scale with the right design and effort.
The poor must be able to use Modicare
The impact of Modicare will also be blunted if households enrol but do not actually use the programme to obtain necessary medical care. A case in point: RSBY only increased utilisation by 1 percentage point, to 2.8% of households. In some states, the hospital-going rate remained below 1%. In states like Karnataka, this came as a surprise. When RSBY started, the premium the state negotiated with insurers was nearly Rs. 500 (USD$7.79). But because of low utilisation, those premiums have fallen to roughly Rs. 200 in recent years.
Our study provides insight into why RSBY did not facilitate utilisation. While we found that RSBY did indeed increase utilisation by 30% percent or more, a significant number of households attempted to use the card but failed. When we probed why households were unable to use RSBY, we found that a third of the time individuals forgot their insurance card or did not know it could be used. More distressing, about half the time the hospital or insurance company could not process the insurance card or refused to cover the care.
These problems are correctable. The government must expend more effort on information and education campaigns. Insurance is a new product, especially for poorer Indians. Structural changes planned under Modicare, such as using Aadhaar2 and hospital-based biometric ID, should reduce the paperwork and hassle costs for beneficiaries. In addition, Modicare must make sure that hospitals that register under the scheme have functioning payment systems and do not turn away NHPS patients.
Many worry about the financial burden of NHPS. They focus on stopping beneficiaries from overusing care or hospitals prescribing unneeded care. Economists call this “moral hazard”. Given India’s low rate of health care utilisation, we believe overspending is not a primary concern in the short run. In the long run, if utilisation levels rise, Modicare can be modified to add a deductible or co-pay and more extensive utilisation review to ensure the government is getting value for its spending.
Supply is as important as demand
It is obvious, but worth repeating, that health insurance is of no value if there are no accessible healthcare facilities. This is a critical obstacle for Modicare. Nearly half of all Indian children live in villages with no healthcare facilities. India would need to increase the number of hospitals by 10% and clinics by 50% to satisfy basic needs. Providing health insurance cannot solve that in the short term. But in the long term it can encourage the private sector to build more facilities.