Designing a health insurance scheme for the public: possibilities and limitations, with specific reference to the state of Karnataka

Abstract

Health insurance is advocated as the mechanism by which heath care access to the poor can be improved. On the contrary, spiralling of health care costs has been observed after introduction of health insurance schemes in many countries. A clear understanding of the health care seeking behaviour of the community is sine quo non for proper designing of a health insurance scheme. Community behaviour determines aspects like potential for the community generation of financial resources, amount and type of usage of health services, choice of health care provider etc. Factors like nature of government involvement, technical issues like adverse selection and moral hazard, relationship with physician, community involvement, administrative costs and frauds also influence the success or failure of a scheme. Present study aims at understanding some such aspects of designing a health insurance scheme with specific reference to the South Indian state of Kama taka. Raw data from a health services survey conducted by the National Sample Survey Organisation (NSSO) in 1995-96 is analysed in order to understand the behaviour of the community. Data have been classified into 16 population groups based on binary classification of four variables- residence -rural/ urban, economic status- BPL / APL,social status - SC or ST / General and Gender- Male/ Female. A mathematical model using MS-Excel® has been constructed for determining the fair premium for any population group and the model was also simulated using @RISK software. It is revealed that a risk pooling mechanism for outpatient services is not economically feasible. Risk pooling, however, is feasible for hospitalisation, but premiums at a flat rate would be regressive as disadvantaged populations like BPL and rural tend to use the services at lower levels. Richer sections significantly access public health services and at the same time private health care services are quite popular with the poor. The study also examines design of two recent health insurance initiatives of the Government of Kama taka, viz. the UNDP sponsored pilot Health Insurance Project and the Y eshasvini Health Scheme. Both the schemes appear to be well meaning and have some innovative features. The major achievement of the UNDP sponsored project is pioneering the concept of insurance in a relatively large community. It also created possibilities for private-public partnerships by involving a NGO in health insurance management. Its biggest failure is not involving private physicians and loosing an opportunity to make the project a success; Introducing the scheme without undertaking necessary structural reforms in the public sector hospitals is another reason.