We learnt from the Prime Minister’s Independence Day speech that Ayushman Bharat scheme is slated to be effective from 25 September. While there are debates that the money allocated may not be enough and the scheme will be rolled out only on the basis of economy of scale, there are still reasons to validate some basics of such schemes.
Profitability in insurance depends upon various factors like mortality, morbidity, expenses and the ability to manage the operations with efficient processes within the boundaries of the premium income received.
There is no one-size-fits-all operational model when it comes to the successful implementation of a scheme. For example, multinational insurers who are successful in one country have met failure in other countries. So, it is not just standard processes or manuals or actuarial formula or stabilised systems that can work seamlessly across geographies such that the success is assured.
Ayushman Bharat scheme is considered as a health protection scheme with a majority of the states opting for the trust model instead of the insurance mechanism, the underlying principles will still work only on the law of large numbers and its respective probabilities of mortality, morbidity etc. In summary, each trust should run like an insurance company by itself. For example, there are many corporates that still run the pension trust without outsourcing it to the insurance company. Insurers certainly have the edge of standardised processes, fraud handling abilities etc.
However, if we look at past government schemes, they are mostly run by domain consultants hired for meeting specialised requirements. For example, Smart Cities Projects uses external private sector consultants. Past Schemes like Rashtriya Swasthya Bima Yojana or RSBY has met a lot of criticism in the past and adopting similar approaches will also meet the same fate.
So,what could have been different during this time. Let us see this from the aspects of people, technology and processes, indicatively if not exhaustively.
People: The trust model requires continuous analysis similar to insurers. This will require a list of specialists like actuaries, claim processing specialists, fraud analysts, fraud investigators etc. This scheme indirectly helps insurance penetration, hence deputation windows can be enabled from the insurance industry. With many trusts in place, a centralised cell can be created and linked with all the trusts run by different states. Specialists can be deputed by the Insurance Regulatory and Development Authority of India (Irdai), insurance companies etc. to offer consulting from this centralised cell. By this way, the processes effective in one trust can be replicated in other trusts with little or no modification. This will also reduce the overhead cost.
Process and technology: Ayushman Bharat has fixed package rates for various procedures based upon its past survey which creates doubts on feasibility across places. For example, a Caesarean operation at ₹9,500 may be feasible in a smaller hospital in a small town but it may not be feasible in a super specialty hospitals wherein charges for caesarian packages are in the range of ₹50,000, unless of course there is volume. So that is going to be a challenge. The other aspect that should be kept in mind is maintaining quality. Ayushman Bharat should incentivise hospitals to get NABH (National Accreditation Board for Hospitals & Healthcare Providers) or Joint Commission International (JCI) accreditation for quality processes. Currently, India has only 538 NABH and 34 JCI hospitals that focus more on the processes and quality of services. This is around 1-3% of all hospitals in India, according to government data.
Ayushman Bharat has the potential to not only improve the medical infrastructure, but also push health insurers to come out with innovative products that can fill any gaps in Ayushman Bharat itself and reduce out-of-pocket expenses further. I remember one old lady who started selling papad and pakodas outside an Amma canteen in Chennai when it was launched, so that customers used to buy food at a low price of ₹5 per plate, but would also spend another ₹10 on a plate of pakoda. It is time for insurers to design products for higher penetration leveraging Ayushman Bharat.
The frauds in the industry always leads to a leakage of 10-15%. Strict control processes using claim analytics, de-duplication of customers etc. can help control frauds. The amount remaining in unclaimed insurance can be redirected to trust funds by modifying existing rules as such schemes contribute to the insurance sector indirectly. Also, Ayushman Bharat is going to generate data in huge magnitude that needs to be published on quarterly or half-yearly basis that will enable beneficiary analysis and push product innovation.
S. Jayaprakash has done his Ph.D on health insurance in India, and has 25 years of experience in the insurance sector