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Feature Universal healthcare

Protecting India’s poorest from unaffordable medical bills

BMJ 2012; 345 doi: (Published 08 November 2012) Cite this as: BMJ 2012;345:e7554
  1. Patralekha Chatterjee, journalist, New Delhi, India
  1. patralekha.chatterjee{at}

Government schemes are bringing healthcare insurance to some of India’s poorest people, reports Patralekha Chatterjee. But are these schemes alone the solution to the debt and destitution that medical bills can bring?

“It is unacceptable that almost 80% of the expenditure on healthcare by our people is met by personal, out of pocket, payment,” India’s new president, Pranab Mukherjee, said on 16 October.1 “I am shocked to note that as many as 40 million people in this country plunge into poverty each year due to expenses for medical treatment.” A report for the journal Economic and Political Weekly estimated that 35 million people were pushed into poverty by the need to pay for healthcare in 1993-4 and 47 million people in 2004-5.2

The topic of medical bills has been inching up the political agenda, and in the past year several states have introduced health insurance schemes for poor people, often bearing the name of a chief minister or popular political leader. For example, Karnataka recently launched the Vajpayee Arogyashree programme, named after the veteran leader of the governing party and former prime minister.

But health economists are divided on whether new government sponsored health insurance schemes will save India’s poor from debt and destitution. This debate comes at a time when the federal government has taken the first steps towards universal healthcare.3 And India’s insurance sector is opening up: two years ago private companies had 6.8 million policies covering nearly 55 million people—a huge jump from fewer than nine million people covered five years earlier.4

India has made progress in healthcare coverage. A recent study for the federal Ministry of Health and Family Welfare carried out by the World Bank reported that more than 300 million people, or more than 25% of India’s population, had access to some form of health insurance by 2010, up from 55 million in 2003-4.5 6 More than 180 million of these were people living below the poverty line (BPL).

But that still leaves the vast majority of more than 1.2 billion people with no choice but to dig into their own pockets for medical treatment. Last year, an expert group on universal health coverage recommended a tax based system of health financing, with the federal government playing a pivotal role.7 It recommended raising public spending on health from about 1.2% of gross domestic product as it is today to at least 2.5% by 2017 and to 3% by 2022, and ensuring availability of free essential drugs by increasing public spending on procurement. It wants all government funded insurance schemes eventually to integrate with the universal system and all health insurance cards to be replaced by national health entitlement cards. But a vocal government faction is sceptical of this model and advocates more private sector involvement.

Meanwhile, Chhattisgarh, Tamil Nadu, Delhi, and Karnataka states have either launched or are expanding cover of government supported health insurance schemes this year. The medical cover varies, as does the eligible population. They follow government sponsored health insurance schemes launched in states like Tamil Nadu and Andhra Pradesh in recent years. (Table 1.2 in the World Bank report summarises some schemes.5) Other parts of India have schemes in the pipeline. It is too early to predict whether they will reduce medical bills for the poorest people, but previous initiatives have given some cause for concern.

The Rashtriya Swasthya Bima Yojana (RSBY; “National Health Insurance Programme”) has become the country’s largest government backed health insurance scheme, covering 32.4 million poor families. Launched in April 2008 by the federal labour ministry, it is a hospital based scheme and is implemented through insurance companies. Premiums are subsidised by federal and state governments. RSBY aims to provide annual cover of 30 000 rupees (£345; €430; $550) a year to each family living below the poverty line as well as to some non-employed workers. However, the government has acknowledged irregularities including fraud, which has led to the scheme ending its partnership with 272 hospitals, known as “de-empanelment.”8 9 The number of hospitals operating under RSBY exceeds 9000.

The Economic Times newspaper has highlighted such irregularities10: “Nazia is 10 years old. But, according to a claim filed by Chhattisgarh based Shaheed Hospital with the RSBY, she has delivered a baby after a caesarean operation.”

The health economist Sakthivel Selvaraj, who works with the Delhi think tank the Public Health Foundation of India, is among those who have been vocal about the limitations of the new generation of health insurance schemes. The schemes “focus on hospitalisation and top end surgical care, whereas a huge chunk of healthcare expenses is due to cost of medicines,” he told the BMJ.

In the journal the Economic and Political Weekly, with Anup K Karan, Selvaraj pointed out that 2.3% and 3.1% of the rural and urban population in India, on average, are in hospital at any given time.11 They also note that “it is again clear that outpatient expenditure far outweighs inpatient care expenditure (in terms of per capita spending, share of the OOP [out of pocket] expenditure and overall household expenses).”

They argue that “the narrow focus” of the new generation health insurance schemes “endangers the health system.” However, the new crop of insurance schemes have a “technical capacity” that offers “temporary relief” and could be fitted into a universal healthcare system when it happens, Selvaraj told the BMJ.

Gerard La Forgia, lead health specialist for the World Bank and coauthor with Somil Nagpal of its recent report5, told the BMJ, “The new generation of health insurance schemes specifically targets the BPL population. This is quite different from the first generation of schemes, such as the Employee State Insurance Scheme and the Central Government Health Scheme, which focused on formal sector [employed] workers and civil servants.

“Many other countries have also taken a similar approach, where they started with the relatively well off and then expanded to the more vulnerable sections of society. However, expansion to the less well off has been problematic. In contrast, the new generation of schemes in India followed what we call a ‘bottom up’ approach, whereby coverage was extended first to the most vulnerable segments of society, and these schemes are now commencing some coverage for non-BPL groups.”

Has the new generation of government sponsored health insurance schemes reduced out of pocket expenses? Small surveys have been conducted for two schemes: Yeshasvini in Karnataka12 and Rajiv Aarogyasri in Andhra Pradesh.13 La Forgia told the BMJ that in both cases out of pocket spending for inpatient care was reduced but that fuller evaluations are awaited.

Responding to complaints about unnecessary procedures carried out by some hospitals implementing the new schemes, La Forgia said, “Firstly, unnecessary care is also a problem for Indians uncovered by insurance and paying out of pocket for their care. Secondly, any insurance system faces this moral issue, where providers have an incentive to overprovide care since it is paid for by a third party. Thirdly, the GSHISs [government sponsored health insurance schemes] are learning to detect and control these provider behaviours as evidenced, for example, by the increasing number of hospital de-empanelments. In fact, this response of GSHISs represents a feasible mechanism to detect and prevent such provider behaviour, where an individual patient would otherwise have little recourse to detect, judge, and act upon these behaviours.

“We suggest that the schemes establish ‘quality threshold’ requirements that set both structure and process standards. All schemes also need to strengthen consumer information arrangements.

“Given that health insurance is something new for all beneficiaries . . . it is not uncommon for people to be uninformed or confused about what is covered and uncovered, what is the benefit cap, what is cashless and what is not (the new generation of schemes offers cashless services to the poor), and the quality of care . . . Schemes need to create formal systems to help beneficiaries understand their rights while tracking member contact with providers. They also need to strengthen grievance and complaint systems.”

The health ministry is closely tracking the discussion on health insurance. “A RSBY-type scheme, with its emphasis on inpatient care and hospitalisation, will not reduce out of pocket expenses. But people need coverage of hospital expenses, and RSBY is not necessarily a bad way of doing it. However, we also need substantial public investment in strengthening and upgrading public health facilities,” Keshav Desiraju, a senior official in the federal health ministry told the BMJ.

“It cannot be a question of one or the other. Primary health centres, community health centres, and district hospitals have to handle the bulk of outpatient care. At the same time all facilities empanelled under RSBY need to have uniformly high standards. If not, the suspicion will be that the scheme is promoting the transfer of funds to private hands. If government facilities are perceived to be at least as good as private facilities, people will go to the government facilities,” Desiraju added.

The Indian cabinet recently approved the Clinical Establishments (Registration and Regulation) Bill 2010.The health ministry has said that it wants to make it mandatory for all private hospitals to publish the cost of treatments. But healthcare tends to be the responsibility of individual states, and how this is to be implemented countrywide remains to be seen.

Desiraju said that the new act “is certainly the best way to regulate performance of institutions. I suppose states will have to be persuaded to adopt the act. Sustained public opinion in favour will help. Even without regulation, departments of health in the states could be given checklists on how to review performance.”

“It is extremely important that health insurance schemes are properly regulated,” as Desiraju says. And policies are being put in place. But irrespective of which healthcare financing model India ultimately chooses, what will matter is how it works in practice.


Cite this as: BMJ 2012;345:e7554


  • Competing interests: None declared.

  • Provenance and peer review: Commissioned; not externally peer reviewed.


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