The Budget has announced an ambitious, state-funded healthcare scheme that would take care of hospitalisation expenses up to a limit of Rs 5 lakh per family for 10 crore families, covering 50 crore Indians, more than half of them above the poverty line. India does need to step up healthcare, on which state funding is an abysmal 1% of GDP at present. However, the Budget did not offer any clarity on how the scheme would be funded or what shape healthcare provision in hospitals would take. Announcing the Ayushman Bharat scheme, the finance minister did not use the term insurance, opting for health protection, instead. It is to be hoped that the government would depart from traditional health insurance, in which the incentives for care providers and insurance companies are all misaligned.
A form of health assurance in which healthcare providers undertake to provide competent care to a defined population entrusted to its charge, for a fee per capita, worked out using the actuarial expertise deployed by insurance companies, would be the ideal way to organise healthcare. In such a scheme, the care provider has no incentive to inflate costs via unnecessary investigations or treatment, which is the bane of the traditional model in which hospitals try to maximise their take from insurance. However, in such a scheme, the care provider does have the incentive to scrimp on treatment costs, harming the patient. Good regulation and a competitive market for such healthcare providers would be the way to address this contingency. That assumes the availability of multiple healthcare providers in a restricted geographic area. And the primary care facilities announced by the government, which is conceptually no different from the extant primary health centres, would be the foundation of such a health protection scheme.
It is to be hoped that the government would come out with the outline of a viable health protection scheme sooner rather than later. And, it is to be hoped, it would be more than mere expansion of the RSBY, which has become dysfunctional in many parts of the country.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
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