In India, Government-Financed Health Insurance for Poor Points Way to Universal Coverage

The story of 20-year-old Eshwar, a resident of rural Karnataka, India, shows the power of free government health insurance to save lives and keep people from falling into poverty. Eshwar recently had a successful heart valve replacement – an expensive surgery his family would not have been able to pay for without a state government program supported by the World Bank, which provides free tertiary medical care to families living below the poverty line, for a range of complex illnesses.
 
In this case, the program paid the full cost of the surgery, a total of 120,000 rupees (US$ 2,000), sparing a catastrophic financial burden on the family.  Without the insurance, the family would have been pushed deep into debt, or Eshwar would have remained untreated.
 
A recent World Bank Group impact evaluation of the Karnataka program comes at a timely moment. The study found that the risk of mortality due to covered conditions was 64 percent lower among poor households entitled to the insurance, while their out-of-pocket health spending on hospital care was 60 percent lower. The government of India is currently developing a “National Health Assurance” program that will build on significant efforts over the past decade to improve access to health services. Relative to the size of the economy, government spending on health in India remains comparatively low (around 1% of GDP); however, in absolute terms, government health spending has risen in line with substantial economic growth over the past decade. In addition, India has recently made commitments to raise government health spending as a proportion of GDP.
 
A large part of the increased available funds have been invested in the government health service delivery system, notably under the National Health Mission, launched in 2005, which has included several important innovations such as putting in place almost one million community health workers (Ashas), paid through incentives tied to specific services, and conditional cash transfers to mothers for delivery in health facilities. During the same period, several state governments, as well as a national program, have provided coverage to the poor for inpatient hospital services, delivered free-of-charge to patients – largely by the private sector (although the proportion of services delivered by public hospitals is growing). Evaluations have been completed on some initiatives, often relying on analysis of available administrative and household survey data – for example, the National Health Mission’s conditional cash transfer program and Andhra Pradesh’s hospital care insurance program.
 
This policy context can be considered on several dimensions, including: (i) primary and hospital services; and (ii) public and private services. With regard to the first dimension, some public health experts have long accepted that it is more cost-effective, and more equitable, to first invest in primary health care services. Such services address the largest proportion of the burden of disease, are usually inexpensive and very effective (i.e. immunization), and are often more accessible to the poor than hospital services. However, this notion has receded somewhat, particularly with the realization that non-communicable diseases like cancer and heart disease are a large and growing burden in developing countries, including among poor and rural populations. Although primary-level services are also important to non-communicable diseases, hospital services are also needed, demanded – and paid-for – by the poor.
 
With regard to the second dimension, private sector health services provide a large proportion of health care in India and represent significant service delivery capacity. Perceptions – in India and elsewhere – have reflected the fact that there are major market failures, essentially leading to exclusion of the poor and the sick, when health care is left to the private market alone. The main policy responses are for government to directly provide health services, and for government to closely regulate the private sector along with subsidizing the purchase of health services (usually through social insurance). Both strategies are being pursued in India.
 
The Karnataka impact evaluation makes a substantial contribution to the evidence base by measuring clear impacts on both mortality and household out-of-pocket spending of a program that purchases services from both private and public hospitals. Among poor households covered by the scheme, mortality from diseases addressed by services paid for by the program (largely cardiac and cancer conditions) was 3.2 per 1,000 in the previous year, compared to 9 per 1,000 among poor households not covered by the program.
 
Reported utilization of tertiary care services for such diseases among poor households covered by the program was higher (although statistically significant with 90% confidence rather than the usual standard of 95%), while average out-of-pocket spending on relevant tertiary care was around 24,000 rupees (US$ 400) among covered households, compared to around 73,000 rupees (US$ 1,200) among poor households not covered by the program.
 
So, the story of Eshwar’s illness and treatment is instructive. Without support from the Karnataka program, Eshwar may have lost his life, and his family would have faced a crippling financial burden. In this situation, Eshwar and his family, like anyone in their situation, hardly cared about the complexities of health policy options - their main concern was the end result.
 
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