India’s new insurance-based healthcare programme, Pradhan Mantri Jan Aarogya Yojana, relies heavily on private hospitals. Of the 14,000 hospitals across the country that have been empanelled under the programme, about 8,000 are owned by the private sector. Since it was launched in September, more than two-third of over four lakh people treated under the programme went to private hospitals, the National Health Agency recently announced.

While the Agency claims extensive private sector participation is necessary to move towards universal healthcare, experiences of existing state health insurance schemes point to the vulnerability of public health programmes that are dependent on private healthcare providers.

The most recent examples comes from Telangana.

On November 20, the Telangana Network Hospitals Association suspended all outpatient services offered at 230 private hospitals across the state under the state government’s Aarogyasri scheme, which provides a health cover of up to Rs 2 lakh to families living below the poverty line. The association said that the state government had failed to pay private hospitals dues of Rs 1,200 crore that had accumulated over the past year. The association also said that it would stop inpatient services as well from December 1.

The crisis was averted when the association resumed its services on December 2, releasing a statement saying it had received assurances that the government would release Rs 150 crores immediately, another Rs 150 crore by the end of December and the remaining amount by the end of the financial year. Needless to say, if the payments are not made on time, the services could snap again.

Telangana is not the only state to face disruptions to its health insurance scheme.

On September 20, the Financial Express reported that New India Assurance, which is a public sector undertaking providing insurance, had pulled out of the Bhamashah Swasthya Bima Yojana – Rajasthan’s state health insurance programme that has been running for three years. The report quoted a letter from the company to the State Health Assurance Agency that administers the scheme saying that the agency had violated its contract by withholding Rs 106.74 crore of premium due to the company. The agency, for its part, said payments were withheld because the company had not paid out claims on time.

This problem has also been resolved but also highlights the tenuous relationships between government administrators and private players.

Payment problems are only the tip of the iceberg. Health researchers say the malaise with government health insurance schemes runs deeper. They have fostered a dependence on the private sector, which is able to dictate terms to the government, forcing it to increase treatment rates. As the rates rise, a larger portion of the government’s healthcare budget now goes to hospitalisation or tertiary care, leading to the further neglect of primary healthcare, which a poor country like India needs.

Public money to private players

The biggest criticism of insurance-based public health schemes is that it transfers taxpayer money into the private coffers.

One example is the Aarogyasri scheme that was launched in unified Andhra Pradesh as a populist measure in 2007 and remains popular 11 years later. The Aarogyasri Healthcare Trust, which administers the scheme, has approved more than 900 surgeries and treatments for which beneficiaries can claim free treatment. The trust fixes a rate for each treatment package and hospitals empanelled under the scheme can claim this amount from the trust after they have treated a beneficiary.

“Nearly 80% of the Aarogyasri budget is going to the private sector,” said MV Ramaniah of the public health organisation Praja Aarogya Vedika, who has analysed payments and insurance disbursements under the scheme. “Even though some procedures are reserved to be performed only in government hospitals, many people still go to the private sector for these surgeries because they believe that government hospitals do not have proper facilities and proper personnel.”

Even the Planning Commission rejected the state’s request in 2009 for central government assistance to Aarogyasri, calling the scheme a “cash cow” for corporate hospitals.

Private hospitals stopped services under Aarogyasri between November 20 and December 1 to protest non-payment of dues.

In Tamil Nadu, an evaluation report of the highly successful Chief Minister’s Comprehensive Health Insurance Scheme in June 2017 noted that there were many more private providers than public health facilities under the scheme. The private sector had a higher share of the claims – 58% in 2015-’16 – and the average claim and approved amount was also significantly higher than in the public sector.

The number of claims in the public sector rose – 35.7% in 2012-’13 to 41.9% in 2015-’16 – but its share in the total amount reimbursed remained almost stagnant. The authors of the report say that this could either be because the government reserved certain procedures to be performed only in government hospitals. But they also raise a red flag. The trend may be because private facilities have been turning down low cost or low profit-margin cases.

Rajalakshmi Ram Prakash, an independent researcher who has studied the Tamil Nadu scheme, finds that even reserving more procedures for government hospitals in order to keep funds tax payer money in the public sector can have adverse effects. She found that some district hospitals had been asked to take care of routine needs or repairs using their insurance revenues. “The way budgets and fund allocation work is that unless there is public expenditure, the budget allocation for the next year is likely to be low because of ‘under utilisation’ or ‘unspent amount’. So if a public hospital needs are met by insurance revenues, this model will starve the public hospitals of direct budget needed for direct provisioning of services.”

Healthcare service disruptions

Depending on private health providers also leaves public health services more prone to disruptions, which can have dire consequences for many patients like those in emergencies, those who have traveled long distances to seek treatment and those who may be losing daily wages during their hospital visits.

The protest by the Telangana Network Hospitals Association this year is not the first time that Aarogyasri hospitals have threatened to withdraw services since the scheme. Private hospital associations again threatened to stop services in December 2015 and in June 2016 protesting the government’s non-payment of dues and resuming services after partial payments were made.

The private hospitals have a legitimate grouse. T Hari Prakash, secretary of the Telangana Network Hospitals Association said that by the end of November this year, private hospitals in Telangana under Aarogyasri has had exhausted their finances and were unable to continue with services.

“For the past four years we have had to make repeated making representations to the government to clear dues,” said Hari Prakash. “Whenever we make a representation, they clear a small amount of up to about Rs 100 crores.”

But every time the network hospitals stop treatments, a large number of patients are affected. According to an analysis by Ramaniah, of 17 lakh surgeries performed Aarogyasri, only 23% have been in public hospitals and the rest in private facilities.

In May 2013, hospital associations threatened to discontinue treatment of patients unless the government revised package rates asking for a 30% increase in the Rs 1,000 crore Aarogyasri annual budget. The state government responded in June 2013 with a 30% hike in tariffs with a further annual hike of 10%.

“The scheme completely depends on the private sector and if the private sector wants to arm twist the government it becomes easy – in the sense that if they want to raise rates, the government cannot do much,” said Sunita Reddy, assistant professor of community medicine at Jawaharlal Nehru University.

At the same time, private hospitals’ demand for higher package rates is triggered in some part by rising healthcare costs. The National Sample Survey Office found that healthcare costs in both urban and rural India have increased three-fold between 2004 and 2014.

Unsustainable models, poor regulation

Rising healthcare costs that lead to rising premiums and increased package rates as well as a focus on tertiary care makes many publicly funded health care programmes unsustainable. An analysis of government-funded health insurance schemes published earlier this year showed that the Net Incurred Claims Ratio – the sum of all claims paid by the insurance company divided by the total premium it has earned in the same year – has been higher than 90% since 2013-’14, indicating that they are unsustainable.

In 2011, analysis by the Planning Commission found that schemes like Aarogyasri have a disproportionate thrust on expensive tertiary care that leads to cost-escalation.

Another reason for Aarogyasri’s frequent financial trouble is simply the large number of beneficiaries.

“In Aarogyasri, about 80% of the population has white cards [that identifies beneficiaries], including families who can well afford to pay for healthcare,” said Reddy.

In India, health insurance schemes have been roping in private hospitals without taking care to ensure proper regulation of the private health sector. Most states have not yet implemented the Clinical Establishments Act that allows private hospitals to be monitored and erring doctors to be penalised. Rashtriya Swasthya Bima Yojana, the PMJAY’s predecessor, has been plagued with fraudulent claims by hospitals for procedures that have not actually been performed as well as unnecessary surgeries only to claim insurance.

The lack of regulation and, therefore, lack of transparency extends to other state-level schemes.

“Private hospitals [under Bhamashah Swasthya Bima Yojana in Rajasthan] do not display the list of packages that they are supposed to provide,” said Chhaya Pachauli, senior programme coordinator at the Centre For Health Equity at the non-government organisation Prayas. “They do not provide the amount of money out of the package amount that has been used.”

Women at a Bhamashah enrolment camp in Rajasthan. (Photo: Hindustan Times)

Insurance firms hold back payments alleging fraud

In Rajasthan, the State Health Assurance Agency resolved its trouble with New India Assurance, which looks after the claims of under its health insurance scheme, within a few days. But the New India Assurance’s letter as reported by the Financial Express, highlights repeated short payments of quarterly premiums, non-sharing of digital beneficiary data, non-implementation of biometric identifications of beneficiary claimants, non-implementation of live capturing of beneficiary photographs at the time of admissions and discharge. Moreover, the news report referred to allegations by the insurer that there was large scale fraud at the hospitals empanelled under the scheme leading to false claims being raised.

Ashish Modi, joint CEO of the Bhamashah Swasthya Bima Yojana, told that the State Health Assurance Agency had withheld the premium because the New India Assurance had not paid pending claims in time.

“Our request for proposal says that New India Assurance has to make payment of any claims within 21 days of submission,” said Modi. “There was a huge pendency of beyond 21 days which NIA was not catering to. We said that whatever pendency was there beyond 21 days was an amount that was unlawfully held by the insurance company. We deducted that much amount of premium from the next installment.”

Modi also said that the insurer did not bring up the problem of fraudulent claims in their meeting with the State Health Assurance Agency.

“If New India Assurance suspected that there were fraudulent claims they could have given a show cause notice and de-empanelled the hospital,” he said.

However, according to the Financial Express report, New India Assurance had de-empanelled 66 hospitals in August but the decision was overruled by the agency.

If private providers are being roped into public health schemes because they have better facilities, then state governments must ensure smoother processes, said Reddy. “We need to smoothen payments and tripartite agreements so that insurance companies clear claims faster and the government makes payment on time so that the private sector does not stop services.”

Unequal access

The dependence on private healthcare providers also has the side effect of unequal access to care, as has been documented in Chhattisgarh.

A recent study of the Mukhyamantri Swasthya Bima Yojana, which is supposed to be a universal health scheme covering all families living in the state, found the highest levels of enrolment in districts that had the most socio-economically vulnerable families highlighting the need for healthcare assistance. However, when the researchers analysed the availability of services, they found that areas with the more vulnerable populations had poorer availabilities of hospital services. While public hospitals were uniformly distributed across the state, there were far fewer private hospitals in backward areas.

Chhattisgarh state map showing empanelled public and private hospitals per 100,000 enrolled across districts and vulnerability groups. (Image: Sulakshana Nandi, Helen Schneider, Samir Garg)

The study also the pattern of claims made and money disbursed under the scheme followed the pattern of the availability of hospitals, showing that far fewer vulnerable people used the scheme.

Overall, there cannot be a true partnership between the state, the unregulated private health sector or even the regulated insurance industry because the latter two are profit-oriented industries, argued Ram Prakash. “It is naive to assume that the State will automatically protect the interests of the poor and marginalised within such PPP models,” she said.