Clipped from: https://economictimes.indiatimes.com
The Insurance Regulatory and Development Authority’s (Irda) reported move to direct insurers to offer a standard Covid-19 insurance cover from June is fine, even if existing health policies cover treatment for the pandemic. A standard product across insurers gives the consumer choice, allows her to compare prices and pick up the most competitively priced product. This, in turn, will help lower tariffs. Alarmingly, the virus can also cause damage to the internal organs of those affected. Will the Covid-19 health policy also cover the treatment costs of the patient as the long-term toll of the disease emerges? Reportedly, China’s health authority has expanded the medical insurance coverage for patients to include such eventualities. Tweaks in the traditional insurance covers is a suboptimal solution for India. Instead, the focus must be to make the country’s population healthy, provide quality care and reduce the per-capita cost of healthcare. The pandemic underscores the need for India to swiftly move to the system of accountable care that covers every citizen.
Traditional health insurance tries and fails to harmonise conflicting incentives: hospitals want to inflate costs, while insurers want to minimise the payout. Accountable care aligns the incentives: healthcare providers undertake to keep a defined population in good health for a fee per capita. The fee is worked out deploying the actuarial expertise used by insurers. So, the focus of care-providers is to keep a patient healthy and treat her in case she falls ill or ends up with a chronic disease. True, there is a risk of the care-provider shortchanging on care to shore up margins. Robust regulation and the danger of reputational damage lessen this risk.
The advantage is that it removes any incentive to inflate costs through needless procedures, investigation or treatment. The per-capita fee can be paid by the State, in case of the poor, jointly by the State and the individuals covered, in the case of the better off, and by those covered when they are well-off. India needs to switch to such a system.