Health insurance plan: A critique

The government has taken up an ambitious insurance plan to ensure health for all by 2032. The aim is to reduce private spending for healthcare services from 64 per cent now to 32 per cent by 2032, reduce the household spending from 15 per cent now to zero per cent by 2032 and increase allocation of funds from 4.27 per cent now to 15 per cent by the 2032 deadline. The plan will see subsidisation of health insurance premiums for 48 million poor people and it will also cover treatment not for all diseases but for 50 most common diseases.
The objective of introducing the plan is clear. It aims to ensure health for all, as none will be left outside the plan's coverage by 2032. Now the question arises as to whether this is a right step in the context of our country. It does not seem to be an opportune policy in view of our economic and societal realities. We may focus on three key aspects. Firstly, we can try to find out a more cost-effective solution that is quite achievable for us in view of our resource constraint and that will produce much better results than the proposed health insurance plan. Secondly, this healthcare plan will not prove a cost-effective measure. Rather, it will aggravate the prevailing private healthcare cost further. Thirdly, following the western economic model blindly is not always desirable.
A BETTER COST-EFFECTIVE SOLUTION: Some people obsessed with the so-called western economic model suffer from the illusion that if we bring healthcare under the purview of the market-based operation, it will produce better results. A person, who knows how far the market rationality can go, can tell us exactly what kind of disaster such a plan will follow.
The irony is that we have some better measures that we can exploit without forcing the total nation to bear a burden that is quite unnecessary for a poor nation like us. The public hospitals are established and fostered to provide low-cost healthcare services to all, especially the disadvantaged and the poor. But due to unbridled corruption and rent-seeking, the effectiveness of the care provided by these hospitals is in jeopardy. If the government comes up with a firm commitment to enforce law strictly and punish the wrongdoers at public hospitals and curb corruption, our public hospitals can ensure better healthcare services for the disadvantaged and the poor. Moreover, if the government can curb corruption at these hospitals and ensure more transparency and allocate more funds for research and healthcare, we will do better in providing services to our people without adopting a superficially ambitious health insurance plan. Ensuring strict law enforcement will cost us less than any measure that we can contemplate at this moment, but a firm commitment to justice and fairness is needed. That is all.
PRIVATE HEALTHCARE COST: Another ambitious target under the proposed health insurance plan is that it will reduce the burden of private healthcare cost as the plan aims to reduce private spending from 64 per cent now to 32 per cent by 2032. The argument is that under the proposed health insurance plan everybody will pay and bear the cost and this will help us reduce the private healthcare spending borne by individuals. One should not be smart enough to detect the flaws in this reasoning. It is true that pooling of individuals' premiums will help reduce the burden of private healthcare cost, but that will be offset by the exact increase in the individuals' premiums. The situation is exactly like climbing a slippery bamboo by a monkey where the monkey aims to reach the peak. Every time he tries to climb the bamboo he goes two feet up but then falls exactly two feet down. The proposed plan to reduce private healthcare cost will be exactly like this. On the one side, it will reduce the individuals' spending by pooling insurance premiums. On the other hand, individuals' premiums will increase. So, the net benefit is almost invisible.
Due to the government's indifference to ensure better transparency in the health sector, the private healthcare sector will see this insurance plan as a golden opportunity to plunder the money of the people. When the insurance plan will be launched, the private hospitals will get a scope to gang up with health insurance agencies to make fat profits. In turn, ordinary people will bear the burden paying higher premiums.
The better way is to regulate the health industry by framing strict laws so that no ill motives can tarnish the image of this sector and jeopardise the lives of millions. The government should have strictly regulated private hospitals long ago in view of their policies regarding charging fees and the frequency of raising the fees, quality of service, corruption in practices etc. But the work to that end has seen little progress.
BLINDLY FOLLOWING WESTERN ECONOMIC MODEL: Our health sector so far has been far off the western healthcare model. Better healthcare through any health insurance programme has been a conventional western economic model, in which providing healthcare service is subject to the formal market mechanism. That means prices guide the allocation for health care. The efficacy of such a system was explored in the 1970s thanks to efforts of some brilliant economists such as John Kenneth Arrow, George Akerlof, Joseph Stiglitz and others.
The problem is that the market can produce a very large degree of exclusion, which will ultimately hinder achieving the health insurance objective. Even if the problem of exclusion is taken care of, the problem of price-setting will still exist. One of the critical factors that insurance companies must recognise before insuring a particular person for a plan is the risk. The selection through risk-based pricing can produce the adverse selection effect-excluding those who need insurance, but including those who can afford high premiums.
But even if we keep aside these from consideration, the inclusion of health care in the formal market mechanism through introduction of a health insurance plan is not desirable at all. From the perspective of a poor and developing nation, this kind of initiative is not laudable. The health insurance plan will ultimately prove to be a great burden, since the healthcare costs will gallop, once the health insurance package is introduced. This vital fact should be taken into consideration.
We live in a country where no accountability exists and corruption is very much widespread. Therefore, before we introduce the health insurance plan, we should eradicate corruption and malpractices from the health sector through strict enforcement of laws. Otherwise, introducing the health insurance plan following the western economic model will not bring any good result.
The contributor writes from the University of Denver, USA.
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