Theoretical underpinnings of a blanket insurance policy for all. Wherewithal's?

The Finance Minister gave a commitment to spend 50000 crore on healthcare in the budget. Government Health spending in India has always been one of the lowest in the world at 1.1% of GDP. A commitment towards increasing this health spending first was reflected in the Health Policy 2017 document and later in the Budget 2018. An increase in public expenditure on health is imminent because of two reasons – One, that lakhs of people every year are pushed back to poverty because of huge out of pocket health spending. Studies have shown that they fall into a debt trap, sell their assets, to seek health and thus from a welfare state perspective, it is essential for state to make public expenditure, so that an affordable access to health services is ensured to all. That is also termed as ‘Universal Health Coverage’. Two, for a developing country, human capital is the most critical link to growth, and thus health is something that needs utmost attention as a developing country needs a healthy work force. The basic aim of health care is to keep people healthy, treating the sick at affordable prices and protecting households against catastrophic expenditures and resultant financial ruin due to medical bills.

Let us try and understand the different types of Healthcare Management Models are available in the world –

The first is the ‘Beveridge Model’, given by William Beveridge, who designed British Health System. Under this model, healthcare is provided to all the citizens by government and is financed through taxes. Most of the hospitals are owned by the government and a large part of the healthcare work force be it doctors, nurses or paramedics, work for the government. There are also private doctors, but they collect their fee from the government, when they provide their services. Government is a sole buyer of the service in Britain, can control what doctors can do and charge, and thus per capita health system cost is maintained at a minimum. In Britain, you never get a doctor bill. That is the reason Princess Kate delivers her baby in the same hospital as other common people and avails the same services. Britain, Spain, Norway, Sweden, Finland, New Zealand and Cuba have adopted this model. Cuba’s model is the purest Beveridge as it is the model of complete government control.

The second Model is the ‘Bismarck Model’. It was invented by Chancellor Otto Van Bismarck, during the process of unification of Germany in the 19^th Century. This model covers everyone in the country under a health insurance plan, where the insurer does not make a profit. Thus, it is a model based on ‘not for profit’ insurance. The insurers are called ‘sickness funds’, financed jointly by employers and employees. Germany has about 240 different funds, and this is a multi-payer model. Tight regulation gives government much of the cost control. Apart from Germany, Japan, Belgium, Netherlands, France and Switzerland follow this model.

The third model is the ‘National Health Insurance Model’. It has elements of both Beveridge and Bismarck. It uses private sector providers that come under a government run insurance program. Every citizen must pay for this insurance program, and every citizen is covered under it. There is no financial motive to deny claims, and no profit, thus it is a cheap and administratively simple model. National Health Insurance Plan, controls costs by getting the sole power of supplying patients to hospitals on one hand, and on the other, attain immense negotiating powers to keep medicine and diagnostic costs from pharma companies and diagnostic service providers to the minimum. Canada, Taiwan and South Korea have adopted this model successfully. The joke is that Canadian drug costs are so low that American stores forge and buy pills from them north of the border.

The fourth model is the ‘Out of Pocket Expenditure’ model, where state does not provide much assistance and medical bills are largely paid out of pocket by the people. In this kind of a system the rich get medical care and the poor get sick and die in the absence of it. This kind of model is prevalent in Africa, India, Rural China and South America.

As far as United States is concerned they have a hybrid model. They have separate systems for separate classes of people. Their Health Insurance Model is a for profit health insurance model. For the veterans, it is Beveridge, for the workforce it is Bismarck, and for the 15% of people with no health insurance, it is out of pocket. Americans, it is said, have messed up their healthcare system. In Baltimore, just 100 yards away from Johns Hopkins Hospital, which is perhaps one of the best hospitals in the world, I saw a sick person lying on the street.

The coinage of the term ‘Modi care’ comes from ‘Obama Care’. I will make a comparison between the two when I have understood ‘Modi Care’ better.

For now, it looks like a hurried exercise to develop a hybrid model. We have free diagnostics and drug distribution schemes, running in some states in India. We have RSBY, and other schemes which are insurance schemes for the poor. We have government hospitals and dispensaries, providing healthcare at low cost and we have corporate hospitals and private clinics, that charge exorbitant amount of money for providing healthcare. We still have a majority of the population paying out of pocket for healthcare.

What are the wherewithal’s of Modicare? Many health economists in the country have said that it is a very difficult fiscal arithmetic to make. Meryll Lynch, has made a calculation that Modicare will cost the government a minimum of $20 billion.

Wait for my next post.