India’s 55 million healthcare conundrum might have options in Coverage however Tech will help too

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My in-laws reside in a stand-alone constructing like many others in Kothrud, one of many older areas in Pune. Most of those stand-alone buildings have safety guards who both reside there by themselves or typically with their total households. Cities like Pune provide higher employment alternatives with a chance of a way of life improve. Mahendra (title modified), safety guard at my in-laws’ constructing, signed up for this deal. He moved into town together with his spouse and child a few yr again and was having fun with his life within the metropolis till someday I discovered him very tense. Typically an extrovert, I observed that Mahendra was virtually speaking to himself, frightened about one thing. 

I requested ‘महेंद्र जी क्या बात है बड़े परेशान से लग रहे हो’ [What’s up Mahendra, you look worried]

He replied ‘परसो बीवी को अस्पताल ले जाना पड़ा’ [Had to take my wife to the hospital the other day]

Me : ‘क्यों क्या हुआ?’ [Why what happened ?]

Him : ‘सीने में बहुत दर्द था तो तुरंत ऑपरेशन करवाना पड़ा. सरकारी अस्पताल में भीड ज्यादा थी इसलिये निजी अस्पताल में ले जाना पड़ा’ [She experienced massive pain in the heart so had to be operated on immediately. Government hospital was packed so had to take her to a private one.

Me : ‘अब सब कुछ ठीक है ना?’ [Everything okay now right ?]

Him : ‘ठीक तो है पर पूरी जमा पुंजी चली गई, महंगा अस्पाताल था’ [Kind of, because I had to spend all my savings given that it was an expensive hospital]

I later learnt that he had no insurance coverage and paid all the pieces out-of-pocket for his spouse’s surgical procedure at a personal hospital. I by no means noticed him once more after that dialog. He was unable to maintain life within the metropolis with no matter little he had left and needed to transfer again to his village. 

*****

55 Million Indians have been pushed into poverty in 2011-2012. 

Simply to place issues in context, that quantity equals total inhabitants of Australia, Israel and Netherlands put collectively pushed into poverty in a single yr. Think about waking up someday and studying the entrance web page of your nationwide every day that claims 

3 international locations pushed into poverty in a single yr. 

That may alarm you proper ? Coming again to India, that quantity is roughly 6% of our inhabitants. So 6% of our total inhabitants was pushed into poverty in a single yr resulting from their incapability to bear medical bills. That is the best quantity (and essentially the most official – kind of – broadly reported by media) that I’ve come throughout. Transferring the clock ahead, a 2022 Oxfam report titled ‘Inequality Kills’ means that 84% of the Indian households suffered from decline in revenue within the pandemic yr (March 2020 – Nov 2021). And simply in that timeframe, greater than 46 million Indians have fallen into excessive poverty. Whereas this report didn’t say it occurred due to healthcare associated bills, it is going to be solely rational to imagine that these households are already hanging by a thread and will likely be unable to to bear even the smallest of medical bills. To make issues worse, Indian Categorical reviews that India spent Rs. 70,000 crores ($10 Bb) out of pocket for COVID associated medical therapy. 

Supply: BMJ

Okay, so we will all agree that the scenario is unhealthy. 

The query then turns into – Who ought to intervene

Sure, I hear you. However earlier than we are saying ‘After all the federal government !’, it is very important attempt to perceive our societal construction in order that we will perceive the accountability inside that assemble. 

Who’s drawback is it anyway ?

There are 3 broad classes of establishments in our trendy societal framework. 

  1. Communities
  2. Markets 
  3. Authorities 

The ‘particular person’ (you/me) often work together with these establishments to get by with our day after day. All the classes have roles to play and all of them have their strengths and weaknesses. I believe we will all agree that a person can’t resolve this mammoth of an issue. So we will rule out people. A neighborhood is nothing however an mixture of people with no coverage making powers so we will rule out neighborhood as properly. Now with regards to healthcare, non-public markets undergo from 2 market failures : data asymmetry and market energy. (Ajay Shah and Vijay Kelkar, In Service of the Republic)

Data Asymmetry 

Whenever you go to a health care provider, if the physician asks you to get a MRI or an X-ray performed, you get it performed proper ? Can we perceive sufficient to problem the advice ? The physician is aware of greater than you on the time of creating that call and thereby suggestion. That is data asymmetry.

Market Energy

You’d have certainly learn horror reviews of how some hospitals managed to generate  astronomical payments for COVID 19 hospitalizations. This specific report is about how a hospital charged 19 Lakhs. 19 Lakhs ! That is market energy. The truth that a hospital might cost 19 lakhs for hospitalization is an indicator of extreme market failure. 

So allow us to partially strike out markets. Partial as a result of, as I clarify later, they positively have a task to play. What I’m attempting to convey proper now could be that they don’t seem to be the first bearer of the accountability to deal with the issue we’re speaking about. Additionally markets are inclined to strongly react to incentives. That’s what all free markets are supposed to do! There’s a very fascinating paper printed within the Journal of American medical affiliation (JAMA) that argues that these incentives are on the centre of plenty of administrative complexities inside healthcare. It means that ‘healthcare is sophisticated as a result of complexity is worthwhile’. So mainly healthcare is complicated resulting from incentives and it could actually turn into easy …. additionally resulting from incentives. However that matter in itself is a sequence of articles, so allow us to transfer previous it for now. 

And that leaves us with just one stakeholder who can attempt to transfer the needle right here – the federal government. 

So what might the federal government do ? 

In Service of the Republic has some steering. It mainly means that at any time when the federal government decides to ‘do one thing’, it typically has 3 decisions – Produce, Regulate, Finance. Every of those decisions is (or ideally ought to be) a response to deal with a number of market failures. Right here is a perfect method to consider how the federal government ought to intervene.

Produce – Public Items 

Finance – Optimistic Externalities 

Regulate – Damaging Externalities, Uneven Data, Market Energy 

So by idea – if we’re experiencing Uneven Data and Market Energy, the proper intervention is to manage. And regulation comes from coverage. So let’s discuss coverage.

PS : It isn’t as straightforward because it sounds. 

Coverage gambit and the challenges of it  

The Financial Survey of 2020-2021 has a devoted chapter on Healthcare titled, and aptly so, ‘Healthcare takes Middle Stage, Lastly!’. It cites a WHO report from 2004 that states that growing life expectancy by 40% might increase the financial development of a nation by 1.4% factors per yr. And life-expectancy will be elevated by spending extra on well being. 

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The survey additionally states that India’s out of pocket expenditure (OOPE) continues to be at ~60% which is the best as in comparison with different low-to-middle-income international locations (LMICs) and positively increased than the world common. 

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And a rise in public spending to 2.5 – 3 % can scale back the OOPE to 30%.

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So if the federal government spends extra upfront, it could actually achieve a lot later. If we already know of such a coverage gambit, what then stops us from conceiving and implementing these coverage adjustments shortly ?

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Earlier than even we start to reply this query, we have to first perceive the complexity of the coverage making equipment. As you possibly can inform from the determine under, there are a number of entities that fall inside the realm of healthcare coverage making in India. All entities have their very own accountability areas which make coverage formulation a tough train. Former union secretary of Ministry of Well being and Household Welfare K Sujatha Rao quotes (clearly primarily based on her first hand expertise) that ‘such a system blurs accountability, contributes to delays in decision-making, diffuses possession, and shifts accountability.’ 

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Supply: Commonwealth fund 

Now allow us to assume for a second that stars lastly align and this equipment is ready to agree on a coverage steering and the price range will get accepted, we now come across a ‘launch of funds and spending’ drawback. In her guide ‘Do We Care?’, Okay Sujatha Rao lays out 8 bottlenecks with regards to the move of funds proper from the Finance ministry all the way down to the healthcare entity that really makes use of these funds. 

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However simply because the coverage is complicated, we can’t quit. In any case this coverage resolution impacts 1/sixth of humanity and continues to be our greatest guess. So push we must always. And push we did. 

Flashback : 12 months 2000. 

Y2K and the beginning of demand facet financing

Whereas the Tech world was falling aside due to the Y2K bug, the Insurance coverage Regulatory and Growth Authority of India (IRDAI) was quietly integrated in 2000 as a response to a coverage suggestion from the Malhotra Committee report (1999). The important thing targets, as said on the IRDAI web site, have been to advertise competitors, improve client alternative and decrease premium. 

I believe we will all agree that it did an honest job in guaranteeing that the panorama appears vibrant 20 years later. What do you say ? 

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Though seeding the business was its core job, business observers largely agree that the conception of IRDAI was primarily to spice up the demand facet financing in healthcare. The evaluation right here was that supply-side financing like constructing major care facilities, secondary care facilities and many others was not working so properly. So the federal government needed to nudge the demand facet. Which mainly meant that as an alternative of constructing all these hospitals and facilities, you set cash straight into the palms of the beneficiary and allow them to select the place would they wish to search care from. They’ve the independence of alternative. The independence of alternative is highly effective as a result of it places strain on all gamers within the markets and consequently the general high quality of service will increase and cash spent by the federal government is used extra effectively. There are analysis papers explaining how demand facet financing appears to work properly in low-and-middle-income international locations (LMICs). As you will have guessed by now, Pradhan Mantri Jan Arogya Yojana (PM-JAY) occurs to be the most important demand-side financing initiative in India. 

However what in regards to the insurance coverage business general ? How are we doing ?

Based on IRDAI report, the general insurance coverage penetration (the ratio of premium underwritten in a yr compared to the GDP of that yr) within the nation as of 2019-2020 is 3.76% (Life – 2.82%, Non-life – 0.94%), the worldwide quantity right here is 7.4%. Lack of understanding and extra paperwork are counted as major causes for low penetration. The identical IRDAI report additionally notes that brokers (particular person/company) nonetheless dominate the insurance coverage gross sales (over 90%). The protection is about 37% all schemes put collectively. This consists of the poorest 100 million households (or roughly 500 million Indians) that the federal government funds the healthcare of. Then there’s a phase that may afford to buy their very own medical health insurance(very similar to those studying this text). 

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Supply: Commonwealthfund

Okay, so the federal government takes care of the poorest and people wealthy sufficient to afford the premiums purchase their very own medical health insurance. However what about these caught within the center ?

NITI Aayog, India’s coverage suppose tank, lately shone a large highlight on what they’re calling as India’s ‘lacking center’. This can be a massive phase, 400 million massive, which is neither as poor to qualify for PM-JAY, nor wealthy sufficient to afford the costly healthcare. However they can pay nominal insurance coverage premiums. For this to occur, the bigger insurance coverage business must take part and work onerous to carry reasonably priced insurance coverage merchandise to the market. And all energy to PM-JAY however we have to amp up the efforts. As of ninth Feb 2022, solely 173.5 million (17.35 crore) playing cards have been issued whereas the eligibility is 500 million (50 crore). This can be a basic instance of how ‘for those who construct it, they are going to come’ doesn’t all the time work. 

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Supply: pmjay.gov.in

In the event you construct it, you higher first inform everybody about it (in a language they perceive) and could also be then they are going to come. Proper, so it’s essential to inform India first. However will it change how India thinks about medical health insurance ? 

COVID-19 appears to have modified how India thinks about medical health insurance 

In the event you drive or journey round India, you recognize properly that if the visitors police stops you at any level, you higher be prepared to provide 4 paperwork – license, registration, Air pollution Underneath Management (PUC) certificates and car insurance coverage. Mainly it’s largely due to regulation (or the worry of it) that India buys motor insurance coverage. Medical insurance is a unique drawback altogether. Nobody is stopping me to test my medical health insurance. There is no such thing as a regulation mandating something like that. And though you certain can depend in your stars to maintain you out of bother, you can’t escape high-costs within the occasion you have been to get hospitalized for some motive. Major care doesn’t hit you as onerous as secondary and tertiary care does. It actually adjustments your monetary actuality. 

Considered one of my family members lately skilled a medical emergency which wanted extended high-cost medical care and sadly this individual was uninsured. My prolonged household needed to pool in some huge cash to get this individual out of the woods. It might have been a lot easier and cheaper to only purchase a medical health insurance, however that’s not prime of our thoughts, at-least not once we are wholesome proper ? This anecdotal proof can be reflective of how India largely thinks of medical health insurance. The ‘hum to abhi jawaan hai, hame kya ho sakta hai’ fallacy hits you onerous. It is not uncommon to not take into consideration medical health insurance till emergency knocks at your door. When it does, it’s already too late.

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However there’s a silver lining. Covid has modified this thought course of for good. Numerous our household and mates suffered from Covid and a small share of the lot wanted hospitalization. In uncommon instances, there have been additionally some fatalities resulting from extreme sickness. This has modified issues. I now see an elevated consciousness about time period insurance coverage and medical health insurance. 

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These are all good indicators. However Insurance coverage business has plenty of inherent issues. Opposed choice and most popular choice are these massive elephants within the room. Opposed choice is the place the ‘prospect’ (later insured) doesn’t disclose details about underlying well being circumstances which makes them extra dangerous and costly to the insurer. The insurer sometimes solves this drawback by asking the prospect undergo a sequence of lab exams which might be related for threat evaluation. This results in one other drawback known as ‘most popular choice’ the place you find yourself choosing solely wholesome consumers and that really defeats the entire concept of getting an insurance coverage. 

NITI Aayog report means that a great way to work round this drawback is to truly improve the pool. There’s statistical proof that for those who improve the pool, the usual deviation on proportion of claims really transfer nearer to zero. In layman phrases, this reduces deviation from what the insurance coverage firms ‘predicted’ the variety of claims could be Vs what number of coverage holders really claimed. 

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Supply: NITI Aayog report 

In Math we belief. This can be a nice place to be proper ? What’s stopping us then ?

Consciousness to start with. Whereas coverage can play its function, know-how will help pluck a few low hanging fruits to speed up this modification.

Can know-how assist make that dent within the Well being Insurance coverage Universe ?

They are saying ‘To a person with hammer, all the pieces appears like a nail’. Expertise is just not that hammer and I certain do not undergo from any such delusion that know-how can resolve all issues, particularly in healthcare. However we reside in a world the place know-how is evolving as you learn this sentence. So it does have leverage in addressing a few of the ache factors.

Improve consciousness

Bear in mind Mahendra ? He was not even aware of PM-JAY or e-SHRAM or some other such program when he was totally eligible for all of them. And this isn’t anecdotal, there’s knowledge from Nationwide Family survey printed on PM-JAY web site indicating this as a reason behind concern.

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Supply: PM-JAY

So this clearly occurs to be the primary order of enterprise. Improve consciousness. Promote (Digital/ Radio/ Paper), leverage your native healthcare chief framework already in place (like ASHA, Anganwadi and many others) to amplify consciousness. However hey your ‘lacking center’ phase ain’t residing rural and is neither within the cities, this has been the most important drawback. That is in-fact the first drawback why distribution prices are so excessive. So as an alternative of looking for them, attempt to discover one thing that’s with them that you could promote on. Did I hear you say Telephones ? YES – they carry telephones! The programmatic promoting know-how is so subtle now that you could just about goal your viewers wherever they’re with wonderful specificity. So here’s what is prime of my thoughts on how tech will help improve consciousness. 

  • Ringtones – All through the pandemic timeframe at any time when I known as anybody, as a rule I heard some message or the opposite about how vaccines work and why one ought to get vaccinated. It labored like magic. Tech will help extrapolate this mannequin for creating consciousness about medical health insurance !
  • Nationwide icons on nationwide channels in nationwide languages – No not MTV, not SONY, particularly not SONY LIV suppose Doordarshan (DD) and suppose non-English and suppose Amitabh Bachchan . I don’t learn about you guys however anytime I hear the person say something in his baritone voice, I immediately wish to imagine it. DD may be very underrated. The attain it has and the belief it instructions is unparalleled. Put Amitabh Bachchan on DD and half your job is completed.  
  • Deliver within the massive weapons in AdTech – Your smartphone/pill/laptop computer junta is all around the web and so are the advertisers and publishers. The federal government/ non-public entities can have interaction with prime expertise from AdTech to make sure that this channel is used successfully. It is extremely highly effective if you recognize what you’re doing. 
  • Piggyback on to present workflows – Suppose PayTm, suppose IRCTC, suppose UPI, suppose Uber, suppose Tata Sky (oh sorry Tata Play), suppose Adhaar workflows and so many others that India already makes use of and is snug with – use them to create consciousness 

Automate/ semi-automate underwriting workflow

Underwriting is a largely guide workflow for the time being since underwriting relies on understanding the ‘paper information’ coming in from the labs into the insurers underwriting division – so to automate this, both the incoming information should be digital in nature (lengthy pull) or the insurance coverage firms want to make use of a mixture of Pure Language Processing/ Synthetic Intelligence / Machine Studying to devour paper information and ‘help’ a human make the choice quicker. One factor that is probably not very obvious proper now, however will quickly be, is the sheer worth that Ayushman Bharat Digital Mission (ABDM) goes so as to add to the info era panorama of the nation. If you wish to perceive extra about ABDM, I’ve written an in depth article right here. One factor is definite, the digital knowledge panorama with different rising applied sciences can actually carry the load off this workflow and make it extra environment friendly. 

Automate/ semi-automate claims processing

NITI Aayog report on the ‘lacking center’ additionally states that standalone well being insurers have operational expense as excessive as 25% of the premiums collected. Numerous it goes into processing claims. Invert this and it turns into the bottom hanging fruit, we will make premiums 25% cheaper by taking this massive chunk of expense away. Like proper now. Similar report states ‘higher use of analytics, standardized codecs for simpler knowledge flows, and different digital device to drive effectivity, and reaching economies of scale by increased volumes can scale back operational prices.’ Now earlier than the skeptics say – certain allow us to throw all of the buzzwords like AI, ML, NLP and see what sticks (sure, somebody non-technical really mentioned this to me as soon as) – let me categorically state that these will not be “buzzwords” – this tech really works.  

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Digital-first, (very) usable workflows

If we will make it straightforward to purchase insurance coverage digitally, ideally piggyback on different workflows, we could possibly transfer the needle on penetration. It’s the best lever to tug. You might have the India stack eco-system to piggy again on for verifying identification, and most significantly it cuts the center males. The potential is large right here (~90% of insurance coverage sale continues to be agent pushed). Brokers take fee, tech stacks don’t. Along with that – we have to obsess over usability – Is the web site/ cellular app straightforward to navigate ? Can your complete fee course of be accomplished on-line? Can Aadhaar be used for KYC ? Can Chatbots be deployed successfully ? Can insurers incentivize self-service over all the pieces else ?

Use alternate indicators of Well being to decrease entry barrier

A pal of mine had his Time period Plan rejected by a well-liked insurance coverage firm as a result of he transparently supplied particulars of one of many hospitalizations that occurred a decade in the past. Insurer mentioned ‘present detailed documentation of the hospitalization’, pal mentioned ‘however it occurred a decade in the past’. Do you maintain onto your hospitalization information and receipts for over a decade ? Precisely. However the Insurer denied him coverage protection. Was there a chance of collect different ‘indicators of well being’ within the current previous and assess the chance rating ? After all there was however that didn’t occur. This can be a individual in his late thirties, completely wholesome and will have added to the ‘pool’ and would have totally paid the premiums and really extremely doubtless not claimed for a foreseeable future, however is now unnoticed. Sure I hear what you’re considering, adversarial choice is the issue that the insurer was attempting to keep away from. However this defeats the entire objective of insurance coverage within the first place, proper ? Once more, it is a market failure and therefore wants some kind of regulation from the federal government to make sure adversarial choice and most popular choice are prevented. 

Use the Web of (so many) issues to push the worth down additional

India’s wristables market crossed over 3800 Cr in 2020 which signifies there’s plenty of curiosity from the shopper facet on this area, this mixed with different wearable know-how can be utilized to generate plenty of good high quality knowledge that prospects can voluntarily submit and get decrease premiums as incentive. That is very a lot doable at present. The tech is there, all it wants is a few firms to attach the dots and go to market with merchandise that assist. 

Personalised pricing primarily based on ‘good indicators’

Does the prospect have credit standing? Have they got driving document ? Tax fee historical past/ Different such indicators that issue into the pricing. Is there some kind of a threat rating or a spinoff primarily based off of some knowledge factors ? All these questions might probably issue into the underwriting workflow impacting the ultimate price of insurance coverage.

Don’t forget the characteristic telephones

It is extremely vital to concentrate to this ecosystem since there are 400 Mn potential prospects for the time being and though logic dictates they might change over to smartphones someday within the close to future, it’s not straightforward to foretell if that will occur within the subsequent 5 yrs/ 10 yrs/ 15 yrs. It might be protected to imagine that it’ll take someday for a important mass to change over from characteristic telephones to smartphones. Additionally the UPI primarily based eco-system will be designed in a method the place it’s API heavy and performance can simply cater to a Smartphone primarily based apps at any time when the switchover occurs. 

Cater to Social Determinants of Well being

Social determinants of well being is a vital (however usually missed) space the place a few of the western world is closely focussed. Social determinants of well being as an idea is non-existent within the Indian insurance coverage area for the time being from what I perceive. Tech is a giant a part of with the ability to assess these social determinants of well being. The report hyperlinked above means that ‘your general well being is set by particular person behaviour (40 p.c), genetics (30 p.c), social circumstance (15 p.c), environmental components (5 p.c), and healthcare (10 p.c)’. As you possibly can inform, all the pieces from geo-spatial knowledge to genetics is used inside the social determinants of well being universe and know-how is on the centre of this universe.

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Supply: Healthedge

So know-how will help, however what would assist essentially the most is that if we might make it cheaper to purchase the insurance coverage. That in my thoughts is absolutely the most important nudge. How a lot ever cliched it sounds, India is a worth delicate nation. A current article in The Indian Categorical lined how Insurers are pushing precisely for this – for a discount in GST on medical health insurance insurance policies. Medical insurance has already surpassed motor insurance coverage throughout pandemic. However the GST of 18% is steep. The advice is to think about the bottom slab of 5%. That may positively be an enormous saving. Additionally improve tax deduction restrict below 80D to present a further nudge. However how precisely can we execute on that is method above my pay grade (and outdoors of the premise of this text). 

Lastly, we can’t let excellent turn into the enemy of excellent. We have to take an knowledgeable view of issues and begin someplace. Tech evolves and can make a bunch of those issues even easier and cheaper to resolve within the coming years. And though medical health insurance continues to be an rising area with regards to India, there are a number of begin ups like Qube Well being, loop well being, Clinikk, Navi and the likes who’ve already jumped in and are working onerous to make a dent by doing all the pieces from making Insurance coverage straightforward, reasonably priced and comprehensible to ‘constructing India’s first managed care mannequin’. Extra energy to them. However allow us to not overlook that we’re at base camp and seeking to climb Mt. Everest right here. We’re 8000 ft away from conquering the summit with sub-zero temperatures and harmful terrain that lies forward of us. 

Allow us to additionally not overlook that there are nonetheless many extra Mahendras on the market who’re one medical occasion away from being pushed into poverty. And it’ll take a concerted effort from people, societies, markets and the federal government to alter this. Even 1 individual pushed into poverty resulting from medical bills is 1 individual too many. However I’m an everlasting optimist and am eagerly ready to see what comes out of all the pieces that’s in movement proper now between coverage and tech. 

For starters, I’d like to see many extra such headlines. 

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This might very properly have been Mahendra’s household ….