Software professional Sumit Sen, who lives in Bengaluru, recently had to take his 68-year-old father to the hospital twice. Here his father spent 10 days the first time and seven days the next time. Both times the bill was a few lakhs, costing around 60,000 to 70,000 rupees a day in the ICU.
Despite using his company’s health insurance, Sumit had to pay 20% of the bill himself. He also spent another 10% of the bill on protective gear and food.
“Only 70% is covered by insurance. To cover my parents I have to pay 11,000 rupees a month to get 10,000 rupees coverage,” says Sen. His father, a retired contractor for a leading public sector company, and mother, a homemaker, are not supported by private or government Insurance programs secured.
Many, like Sen, rely on employers for health insurance and do not choose private health insurance. Then there is a significant portion of the population – 30% according to Niti Aayog – who have no health insurance whatsoever. For this group and the “missing middle” who are not covered by any insurance system, holistic health care remains a dream.
Unexpected injury or illness can be catastrophic for the families that make up this “missing center.” A study by the Ministry of Statistics and Programs Implementation put the average cost of treatment in a government hospital at Rs 4,452 per day and estimated that a day’s hospitalization could cost Rs 31,845 in the private sector. Even prolonged hospitalization in government hospitals can leave families in financial distress.
Without a regulatory mechanism to monitor rising medical costs, a lack of health insurance can be particularly devastating for low- and middle-income families.
In fact, according to a study by Brookings India, seven percent of India’s population is pushed into poverty every year because of medical debt. A 2019 report by the National Bureau of Statistics suggests that medical spending contributes to 11.9% of rural debt and 12.7% of urban debt in India.
Almost 63% of all medical expenses in the country are spent out of pocket – the highest in the world. To reduce economic vulnerability, Niti Aayog has set a goal of achieving universal health coverage by 2022. Despite this, 40.5 million eligible people are not covered by any insurance scheme, according to a 2021 report by Niti Aayog.
The report also shows that most of the insured – some 69 million – fall under the Ayushman Bharat scheme, followed by the Employees’ State Insurance Scheme (ESIS). Coverage from private providers and the central government health system makes up a tiny part of India’s health insurance system.
The “missing middle” is not economically homogeneous. It contains several groups with all expenditure quantiles.
Niti Aayog’s report attributes the reason the missing middle remains uncovered to “the lack of a cost-effective health insurance product, the missing middle remains uncovered despite the ability to pay nominal premiums. A comprehensive product for this segment … can expand health insurance coverage.”
Even people covered under these programs are not safe from unexpected healthcare emergencies that drain their savings.
Aruna Krishnaswamy (not her real name), a media professional, was making the rounds of one of Delhi’s top private hospitals with her father, who has since died. Despite being covered by her company’s health insurance, a long hospital stay for a chronic illness, such as cancer, left her family in financial distress. Eventually, she resorted to crowdfunding to support her father’s treatment.
This financial pressure meant she had to ignore her own gynecological ailments. “Every penny I made would go toward my father’s treatment. I haven’t been able to get medical treatment yet. I have nothing but company health insurance, which is not enough,” she says.
Although a large portion of private hospital revenue comes from insurance, patients still have to pay out of pocket. Called co-payment systems, they require patients to pay part of the bill. “Nearly 70% of revenue comes from insured patients. It is rare that patients who pay out of pocket or in cash can afford to do so. They pay out of pocket because insurance coverage doesn’t match the bill or isn’t covered at all,” says Dilip Jose, managing director and CEO of a network of hospitals.
“Some are elderly people who don’t have insurance and can’t claim one now,” he adds.
Another important question is what happens to those who go to private hospitals for treatment but cannot afford the bill. Many hospitals have adopted a protocol through which they offer subsidized treatments to some of those who cannot afford it.
“We cannot offer this to all patients, but we do if it is necessary. Children’s diseases, dialysis and cancer patients are some areas in which we would like to help our patients. However, we don’t keep track of how many patients we’ve helped,” says Jose. He adds that in such cases, the hospital waives the doctor’s fees and only charges for the equipment and supplies that the hospital needs to procure.
Azad Moopen, chairman of a chain of hospitals, selects a few cases from patients who are running out of money. The foundation uses crowdfunding to help them continue treatment.
But such initiatives are few and far between, resemble lottery tickets, and lack the security of insurance.
Then there is the issue of accessibility to hospitals. Even if people in Tier II and Tier III cities are insured, they may not have access to hospitals to get treatment. A general lack of awareness among the population is also a barrier to widespread coverage.
During the pandemic, the insurance industry’s percentage growth actually slowed from 16.63% in 2019-20 to 14.34% in 2020-21. The number of patients claiming hospital bills also increased only slightly. The claims ratio increased from 85.70% in 2019-20 to 89.51% in 2020-21.
Has the pandemic changed Indians’ perception of health insurance in any way? Amit Chhabra, the head of health and travel insurance at an insurance company, explains that people often see insurance as a tax-saving product. “The pandemic has changed things. Three to four years ago, our market outside of the top 50 cities was only 10%, but now it’s grown to about 30%. Previously the number of people looking for an insurance sum of Rs 20 lakh and above was negligible, now the number has grown to 20-30% of sales volume,” says Amit Chhabra.
Chhabra adds that another big change due to the pandemic is that teens have also started thinking about health insurance. In the past, most requests for support came from middle-aged people with families.
One way out is to think of health insurance as end-to-end coverage that also pays for consumables and non-medical components, explains Ashish Yadav, product manager at a health insurance company. In the meantime, insurance companies with ambulance services are also being sought, he adds.
Krishnan ASV, an institutional analyst for a bank, believes that “greater financial awareness and higher income per capita are both critical to increasing health insurance coverage in India. In the meantime, since per capita income can only improve gradually, health insurance penetration will need a regulator and political support from government subsidies.”
The country’s healthcare spending is 4.5% of GDP – well below the global average, which also needs attention, he says.
As for the future, everyone in the ecosystem agrees that health insurance will become mainstream once health insurance becomes more inclusive and the healthcare system reaches every small town in India.
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