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					Health Insurance



    Dr Sanjay Arya
                Definition

 A contract where individual or group purchase
 in advance health coverage by paying a fee
 called premium.

 Also  defined as,” including all financial
 arrangements where consumers can avoid or
 reduce their expenditures at the time of use of
 the services.”
 (RameshBhat,DaleepMavalankar)
Why Health Insurance?
      Basic Figures (GDP-related)


                           Public         Covered         Out of pocket
                                          insurance
 Country    Total Health   expenditure    expenditures    expenditures
            expenditure    as % of the    as % of the     as % of the
            as% GDP        total health   total health    total health
                           expenditures   expenditures    expenditures
India       5.2%           13%            2.4%            84.6%
Singapore   3.1%           35.8%           --             64.2%
UK          5.6%           96.9%           --             3.1%

Germany     10.5%          77.5%          11.3%           11.2%
USA         13.7%          44.1%          39.3%           16.6%

                                                Source : WHO/2000
 Status of health care Financing

Out of total health spending :

 87% - Private financing


 13% - Public financing
   15% Centre (.9% of GDP)


   85% State
                Bare facts

 Average cost of hospitalization : 58% of
 annual income

 40% of hospitalized sell asset or borrow
 heavily

 25% fall below poverty line after spell of
 hospitalization
      Private vs Public sector

 1978 : 70% bed in public sector


 1998 : 80% bed in private sector


 60% OPD – private sector


 60% Indoor – public sector
 Expenditure on care is 2-5 more in private sector


 Over years, for each % increase in per capita
 income, private health expenditure has increased
 by 1.47%

 Government run set up free, so people did not
 demand quality and better access & people
 turned to private set up.
      Why Health Insurance?

 Government has difficulty in cost recovery.


 Government unable to provide more
 resources.

 WTO agreement forced govt. to open up
 health insurance
Healthcare Services Growth




 Healthcare services – expected CAGR of 11 to 13%
    Financing models in select Countries
                                                                                                          Policy Choices
                                     100                                                      Meet demand for prepaid care by: -
     % of payment from pvt voluntary insurance

                                                                                              A- Allowing growth of pvt voluntary
                                                                                              insurance
                                                                                Switzerland
                                                                                              B- State assumption of responsibility
                                                                                    USA

                                                                                                   Thailand
                                                                                  Switzerland
                                                 50                                              Mexico
                                                              A                                    France
                                                                  Alternative                         Sweden
                                                                  directions
                                                                        B

                                                      INDIA
                                                  0                    50                   100
                                                 % of payment from social insurance or public finance
1
1
       Expected Benefits

 An alternative means of health care
 financing.

 Expected to bring capital into health
 sector

 Expected to improve access.
Private Health
  Insurance
            Pre -requisites

 Capacity to pay premium


 Network of credible service provider


 Tight regulatory framework
       How Are We Placed?

 In India, only 315 million people (35%)
 are insurable with capacity to spend Rs.
 1000/- premium per annum.

 70% population : Rural


 Lack of Health care providers in rural
 areas.
              Current Status


 Total Health Expenditure : 3 Lakh crore


 Hospitalization Cost : 1 Lakh crore


 Health Insurance Premium : 6,000 crore
           Current Status

 Health insurance coverage of urban
 population is higher

 Claim ratio/pay out   > 100%

 Health care spending of population with
 insurance is thrice that of population
 without insurance
    Regulatory Framework?


• Skimping: Insurers deny benefits to the
 sick by    having    several   exclusion
 clauses.

• Skimming: Practice of insuring well off
 people.
         Adverse Effects


• Adverse Selection: The sick seek a
 coverage and the healthy does not.

• Moral hazards: Behaviour of the insured
 is effected by insurance.
                   Result

 All adverse effects are visible


 None of the stated benefits are visible.



 Impact of liberalization so far : Escalation of
  cost
What Is The Way Out ?
Insurance is not an intuitive concept for most
people.

D. Kehneman & A.Tversky have shown that:

People tend to accept large uncertain risk in
order to avoid small sure losses
                 and
Underestimate low probability event as if
probability was zero.
How to overcome this Barrier?

 Some countries have overcome
this misconception by
implementing universal health
insurance cover.
       Options for Government


 Government pays premium


 Government make scheme for middle
 class with subsidy to poor

 Affiliating health insurance to employment
 status

 Micro health finance
 Employer based insurance : 20 million with
 reimbursement

 Employer provide care : 30 million


 Community Health Insurance (CHI) - A
 form of micro finance : 5 million
       Micro Health Insurance
 Works on the principle of the reduction
 or elimination of the uncertain risk of
 loss for the individual or household

 By combining a larger number of
 similarly exposed individuals or
 households who are included in
 common fund

 That makes good the loss caused to any
 one member (ILO - 1996)
       Community Health
          Insurance

 A voluntary, non-profit insurance
 scheme formed on the basis of solidarity

 Collective pooling of health risks


 Members participate effectively in its
 management and functioning
 Provision of tailor made health insurance
 product involving low premium and modest
 benefits

 Resource mobilization from targeted
 population

 Intermediary agency to over come
 informational disadvantages and high
 transaction costs
       Social Insurance

 Compulsory participation.

 Contributions   from   employers    and
 employees.

 Contributions   proportional   to   the
 earnings of the employees.
          Social Insurance


 Coverage is without a means test.

 Scale of medical benefit is not related
 to contribution.
                Epilogue

 Health insurance is not merely private
 Insurance.

 Many developing countries have reaped
 the benefits of the concept.

 The concept has great possibilities for
 our country.
“One of the greatest investments which
we can make is to invest in health, for
there is no other investment like it…..

Health is life insurance, success and
happiness insurance.”

Mahatama Gandhi
Thank you

				
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