This article was written after the Centre for Budget and Policy Studies completed a household survey in the district of Shimoga in Karnataka in November 2010. The team had been interacting with various stakeholders – the department of labour, the insurance company, the district officers, hospital administrators and the beneficiaries of the scheme over the last 6 months.
The Rashtriya Swastha Bima Yojna is a scheme that deserves the international attention it is currently receiving. The scheme promises to cover Below Poverty Line families against medical expenditures that have the potential to push them further into poverty. For an enrolment fee of just Rs 30/- per annum, a family receives a smart card, Rs 30,000 as coverage for a year and access to private and public hospitals across the country. The government supports these families by paying the premium amount for those enrolled to the Insurance Company involved. The scheme is unique in that it involves a partnership of private and public medical care providers, an insurance company and its private third party administrator for the service delivery while the government is the principal funding agency. The design of the scheme has sparked international interest; however, service delivery of the scheme still remains a challenge.
In Karnataka, for example, low awareness among beneficiaries, delays in payments to hospitals hence poor service delivery, a disinterested government coordinating agency, and an uncooperative insurance company had resulted in a low claim rate. The latest figures from the website www.rsby.gov.in showed that the number of claims was only 391 and only Rs 22 lakhs had been paid out in Karnataka. So then, why is this well designed scheme not being able to deliver in Karnataka?
To start with let us consider the premise of the insurance scheme. The government pays the insurance company for the number of beneficiaries they enrol. This implies that there is an inbuilt incentive designed for the insurance company to enrol more beneficiaries since their revenues are determined by this measure. As more people enrol in the scheme the insurance company earns more revenue.
Most insurance companies, as one would know from personal experience, make you pay your insurance premiums before the start of the year of the policy. In Karnataka however, an interview with the insurance company revealed that they were yet to receive the full amount for their enrolment. Delays in payments imply there is no cash flow for the insurance company to start off with. It is then not surprising that in Karnataka, the claim rates – claims to be paid / total revenues – were as low as 3.16% in October 2010. Another interesting but conjectural consequence of this was that hospitals were complaining that there was a delay in their reimbursements under the scheme.
One of the most exciting features of the RSBY was the smart card that beneficiaries received. The smart card was a unique identification card for families enrolled in the scheme with their patient and payment history. The smart card was designed to allow patients access to emplaned hospitals around the country. However, a survey by the CBPS revealed that the technology, that was created to make the process of claims more efficient, was actually proving to be a disadvantage for its users. Hospitals and beneficiaries alike complained that they could not provide services or were being denied services because the software was not working. The complaints ranged from software inability to identify the beneficiary, their thumb print, others in the household and even that the software was not loading all information about surgeries. As a result either beneficiaries were turned away or hospitals were still claiming through paper based claims. There is no known incentive designed within the policy framework to improve the efficiency of the scheme by ensuring that the smart card technology works.
Since the government provides a 100% subsidy on the premium, it is tax payers money that is currently funding the RSBY. In Karnataka, the figure was a whopping Rs 7 crores of premium amounts paid to the insurance company. The loss ratio, which is simply the total costs of the insurance company divided by the revenues, was around 54% in the RSBY scheme. The industry average on the other hand is 85%. There are no policy requirements that insurance companies have to maintain a particular loss ratio. Without any (dis)incentive for the insurance company to maintain this ratio insurance companies have the free hand to make payments on as little claims as possible. This ratio is something that the government could easily monitor. A disincentive on a low loss ratio could further encourage the insurance company to get its hands dirty on promoting the scheme and ensuring more claims.
The next logical question is if it’s fair to assume that an Insurance Company would be interested in promoting its product. Below Poverty line families from rural areas (who are covered under the scheme) are hard to reach as they are spread out over a large geographical area. Though well organized health camps could be the answer, there is no incentive for the insurance company to support these. This is because more health camps would imply more claims and hence more pay outs for the insurance company. The policy design stipulates that the insurance company has to be responsible for the promotions, but as we saw previously, this is not in alignment with the insurance company’s interest.
In Karnataka, after a survey was completed in one district, survey officers noted that nobody interviewed knew anything about the benefits of the scheme. Those who did, mentioned that it would provide free services in government hospitals, it was a card to be kept safely in the cupboard, it covered a patient for 25% of his medical care costs and so on. This information came from BPL families who were enrolled, Anganwadi teachers who facilitated the process, and the gram panchayat secretaries who were the key officials in deciding the beneficiary list. Then, whom can one assume to be responsible for the promotion of the scheme? While it is easy to guess that the answer may be the ‘Government’, there is no policy that makes the government or the nodal department in the State accountable for low awareness rates. Also, organizing health camps requires not only motivation, but also leadership and coordination of various government agencies.
A starting point for improving service delivery would be the improvement in the accountability mechanisms of the scheme. In addition, the incentives of the scheme need to be realigned to account for the different goals and views of the various stakeholders. While the RSBY has the potential to pave the way for Universal Health Insurance in India, these implementation issues, especially when it comes to the current target beneficiaries of BPL families, have to be dealt with and quickly. If these are not addressed, the scheme will end up losing steam like all other schemes designed by the government. A consequence of which is that tax payers money is being used inefficiently.