When the Rashtriya Swasthya Bima Yojana or RSBY was launched in 2008-’09 it was heralded in as one of the most ambitious programmes of the Government of India that would finally provide free access to quality healthcare to the poor. However, after more than eight years’ expenditure of about Rs 5,000 crore, the programme has failed to protect poor households from financial risks due to healthcare.

Under the RSBY, Below Poverty Line or BPL households are entitled to hospitalisation coverage of up to Rs 30,000 annually. The programme functions through a network of about 8,700 hospitals and 14 insurance companies from both the public and private sectors. It has funded more than 14 million hospitalisations so far. This is less than two million hospitalisations per year, barely 3% of the total annual hospitalisation in the country and only about 10% of annual hospitalisation among the poor.

Our recent analysis on the impact of RSBY published in the journal Social Science and Medicine shows that the scheme has had little effect in reducing the level of health expenditure for poor families and that it has helped reduce the probability of catastrophic inpatient expenditure only marginally. Households enrolled under the scheme continue to have to make significant out-of-pocket payments to access healthcare, the probability of incurring such expenditure going up 30% under the scheme.

So, what has gone wrong? The impact evaluation study indicates several problems with the design and implementation of the scheme.

Inadequate outreach

There are approximately 36 million families enrolled in the RSBY. That is about 60% of all poor families in the 520 districts where the programme has been implemented among of India’s 625 districts. The number of families enrolled also makes up only about the 15% of the 250 million poor families in the country. To identify households eligible for the scheme, the health ministry used BPL data from censuses conducted by state governments. There are several problems with this list as indicated by numerous studies in the past.

It is well known that the BPL list is highly contaminated implying many poor households are left out and many non-poor households are in the list. In addition, most states conducted census exercises in 2002-’03, since when the economic status of many households may have changed.

Moreover, the scheme has not been able to reach all eligible BPL families, particularly living in remote areas. It is most likely that the families left out are those that are in the greatest need of free healthcare. With an enrollment rate far short of its target, the scheme failed even in its first major task.

Inadequate benefits

Providing Rs 30,000 per year for the healthcare needs of a family – the average size of which may be four people – is grossly inadequate. In India, the average expenditure in 2014 for a single hospitalisation at a private hospital was about Rs 26,000, according to data from the National Sample Survey Organisation. This implies that even if one member of a beneficiary family gets hospitalised, the family exhausts its RSBY coverage for the year, leaving it nothing for inevitable post-hospitalisation costs and possible healthcare needs of other family members.

This Rs 30,000 limit was fixed in 2008 and has not been revised since, even though costs of hospitalisation across the country have almost doubled since then.

However, starting this month, Chhattisgarh has raised the limit for free treatment for families with Health Smart Cards issued under RSBY from Rs 30,000 to Rs 50,000.

Outpatient services not covered

The RSBY does not provide coverage for outpatient care. But, outpatient care is the overwhelming component accounting for 70% of healthcare in India. Accordingly, out-of-pocket payments on outpatient care constitutes up to 60% of total healthcare expenditure in the country. Studies in the past have shown that outpatient related expenditure, not inpatient care, has caused the most catastrophic health expenditure to Indian households.

Unless all outpatient care or at least the treatment of chronic diseases is covered, healthcare coverage schemes cannot provide any significant financial risk protection to Indian families. This is particularly important in case of schemes for the poor, since they prefer to seek outpatient treatment instead of being hospitalised and losing on work days and daily wages.

Lack of information

The success of any pro-poor health insurance scheme depends on an effective information and education campaign. Such campaigns help potential beneficiaries understand the scheme. In case of a healthcare scheme like the RSBY, it is important to make beneficiaries aware of whom to consult when they need medical and hospital services.

In general, people enrolled under the RSBY have a poor understanding of how it works and the process of availing of healthcare services through it.

One side effect of a health insurance scheme is that doctors might over-prescribe medicines and recommend unnecessary treatments – the so called “moral hazard”. RSBY beneficiaries often face this situation. Hospitals over prescribe the treatment and try to inflate hospital bills beyond the Rs 30,000 limit and ask the RSBY patient to pay the balance. Most countries have found that providing health insurance without regulating practices of the health providers usually limits success of these schemes.

The government needs to establish mechanisms to monitor healthcare providers, set up payment methods that incentivise healthcare providers to reduce unnecessary prescriptions and tests, and set up a technology system to audit providers.

The writer is a health economist with the Indian Institute of Public Health, Public Health Foundation of India.