In the current model, there is no incentive for healthcare providers to keep an insured individual healthy; they get some business only if the latter falls ill
The Central government reportedly plans to revamp its health scheme for current and former employees, both by revising the rates fixed in 2014 and by expediting payments to private sector care providers, many of whom have turned hostile to entertaining such patients on account of obsolete rates and delayed payments.
However, by just focusing on expeditious payments and more efficient processing of payment claims, the government misses an opportunity to revamp the entire system of taking care of employee health.
The Central Government Health Scheme (CGHS) offers treatment by state-owned enterprises and an insurance scheme that covers treatment at private hospitals that are willing to get on to the CGHS panel of those ready to offer care at government-stipulated rates. These are designed to wrest a bulk-purchase discount from the healthcare provider’s normal rates for individuals without insurance cover.
How insurance works
Health insurance works like this: an insured patient falls ill, approaches a healthcare provider empanelled by the insurance company, the care provider determines what ails the patient by employing assorted investigations, treats the patient, hospitalising the patient if required, sends him or her off and recovers the cost of investigation and treatment from the insurance company.
In case the hospital permits cashless treatment for those insured, the patient is spared upfront payment. Otherwise, the patient has to pony up the cost of the treatment and wait for reimbursement by the insurance company.
The care-providing hospital’s incentive is to maximise its realisation from insurance. The insurance company’s incentive is to minimise the payout to the hospital.
Conflicting incentives
These conflicting incentives result in the patient being subjected to some avoidable investigations, medication, specialist visits and treatment procedures. An MRI scan might be carried out in place of an ultrasound scan; a dynamic contrast-enhanced MRI scan might be performed when a simple MRI might suffice; 25 different types of blood tests might be done instead of the five required; and five different specialist doctors might pay fleeting visits to a patient who actually needs only one or two expert consultations.
The insurance company, on its part, tries hard to disallow some of the claims it is presented with, leading to the hospital skipping some vital test or the other for the next patient covered by the same insurance company who presents herself.
And, in this whole scenario, there is no incentive for the care provider to keep an insured individual healthy. Only if the insured individuals fall ill would the care provider get some business. Clearly, this is a messed-up model of taking care of people’s health.
The alternative
But there is an alternative. The care provider offers to keep a defined population entrusted to its charge in good health, and to treat those who fall ill. In return, it collects, up front, a payment per capita, which should cover the cost of pre-emptive health checks, effective treatment in case of illness, and a profit margin for the care provider.
A prudent care provider, in this mode, would take maximum effort to keep the individuals, whose care it takes on, in good physical and mental condition. The less they fall ill, the less it has to spend on treatment, and the greater its profits.
This means the care provider would treat nutrition advice not as an afterthought tagged on at the tail end of a patient’s stay in the hospital when the only thought in her mind is to reach home at the earliest. It also means that the care provider could institute a monitored exercise regimen, and, perhaps, innovate a mechanism for collecting, collating and analysing the diverse kinds of data generated by the digital devices, including wearables, that most people come equipped with straight out of kindergarten.
And when an insured individual does fall ill, the incentive in force is to avoid, rather than carry out, superfluous investigations, procedures and medication.
The net result would be healthier people, less costly healthcare and assured income for hospitals that no longer pray for a plague to strike the land and generate patients for them.
Risks and the way out
This model of care has two risks. One, in order to save on costs to the nth degree possible, it could let patients die rather than treat them. Two, the hospital might go wrong in charging the right fee to be collected upfront, erring on the high side to generate super profits or erring on the low side to go broke.
Proper actuarial calculations of the kind employed by insurance companies will take care of the second type of risk. Competition and regulation can together mitigate the first risk as well.
The CGHS can assign different patient groups in the same city to different healthcare providers and compare the outcomes for staying healthy, the quality of treatment, and outcomes. Patients should be free to migrate to the care provider of their choice once in every block of say, five years.
Aversion to reputational damage should fortify normal fear of regulatory retribution to pre-empt any temptation on the part of healthcare providers to live and let die.
A similar revamp should be done for the Ayushman Bharat scheme. The low-cost hospital chain Glocal has successfully worked such a scheme, with the per-capita premium being paid by different state governments, and the Narayana healthcare group offers such a managed care scheme.
State spending on healthcare should go to keep people healthy, not to bloat the bottom lines of hospital chains.
(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal.)
