A universal insurance focused on high-cost ailments

It was not like there was no cure. It was not like nothing could be done. It was just a matter of money, and there wasn’t enough of it to save Palak (name changed), age 8. Palak was that child who beamed her big smile whenever she saw you. She loved to sing nursery rhymes and play clapping games. And then, she was diagnosed with blood cancer.

It would cost Rs 15 lakh for a cord blood transplant that would ensure that her bone marrow started to make healthy cells instead of cancerous ones. Medicine can now effectively cure not just blood cancers but many serious conditions. The costs of these treatments can be high, however. In many areas of Mumbai, Rs 15 lakh won’t even buy a small room. But for more than 95 per cent of Indians, not just the very poor, this sum is as out of reach as a flat in the city—just like it was for Palak’s family.

But families are not meant to pay these large sums. Health insurance is. That’s why it exists. Health insurance is like the extra hull on the Indonesian fishing boat, the Jukong, which 2,000 years ago allowed them to sail across the Indian Ocean all the way to Australia. The additional hull gave them peace of mind even when not using it because they knew it could stabilise their boat and prevent it from sinking when the ocean turned fierce.

For every family to have this kind of protection regarding their healthcare expenditure in the form of insurance, lakhs of families would have to come together to share these risks. This is achieved only when everyone is able and willing to buy health insurance and pay the requisite premia. This does not happen naturally, not even in more developed countries. Therefore, governments need to step in to help.

For every family to have this kind of protection regarding their healthcare expenditure in the form of insurance, lakhs of families would have to come together to share in these risks. This is achieved only when everyone is able and willing to buy health insurance and pay the requisite premia. This does not happen naturally, not even in more developed countries. Therefore, governments need to step in to help.

Recognising this, most state governments in India already offer free health insurance plans, which are paid for by taxes. These plans work with thousands of hospitals, and the insurance pays all patient costs.

This is wonderful news, but comes with a twofold problem: a) the current insurance plans cover many conditions but since they have been allocated very small amounts, they cover only 30 per cent to 40 per cent of the population; and, b) even for those that they do cover, the insurance plans carry upper limits which are insufficient to cover the full treatment costs of many major diseases.

As a result, about half the payments under these plans are for amounts less than Rs 7,000 per event, which are too small to be meaningful, with only a tiny proportion (4 per cent) of the claims being above Rs 1 lakh. Is this good use of already tight government budgets? Or is it like trying to teach everybody to swim in order to save them from drowning, which, while helpful, will involve a lot of wasted effort when giving them life jackets would be much more effective?

With the very limited government money on offer and the need for protection being almost universal, the state governments would do well to use that money instead to offer an insurance plan that covers their entire population (the poor and the non-poor) for only a limited number of very expensive and very rare conditions. Knowing that they have this coverage will give all their people peace of mind and stability, even though most will never use it. And, since the covered conditions are rare, even if each one costs lakhs of rupees, the total amount needed will still be within the allocated budget.

Offering this insurance coverage will allow state governments to take the time they need to build more robust healthcare systems with the rest of their budgets. These can offer free care to everybody for everyday conditions that afflict their residents (dengue, diabetes, high blood pressure) and for those that their insurance plans will no longer cover. With this new type of insurance in place, the government will have the comfort of knowing that if any household encounters a massive jolt on the health front, their boat will not sink, and lives will not be lost.

If everybody is automatically enrolled, the need to check and recheck people’s identity and enrolment status—a major problem in the current system—will also disappear. Covering the entire population will also allow state governments to use their purchasing power to negotiate lower prices for the most expensive conditions. Keeping prices for the highest-cost conditions at the largest hospitals in check will not only help the plan but also have a cascading effect on all healthcare costs, making it much cheaper for them to, eventually, build a healthcare system which covers all conditions.

When the massive shock of blood cancer hit Palak’s family, they had no choice but to let her and all of their joy go. The tragedy was that Palak did not have to die. Medicine already had the answers they needed. When it’s not medicine falling short but money, the new insurance plans can prevent tragedies like Palak’s.

This is a fundamentally different way of addressing the persistent and nagging worries that any family suffers from—of a disease that can ruin them financially or force them let a loved one die just because a cure is unaffordable. In other words, such an approach seeks to address the really ‘big’ problems through insurance and works towards solving the ‘smaller’ ones within the healthcare system.

It is true that we cannot ignore the more common ailments which, too, cause death and devastation in families, but separating the rare highcost treatments from the more routine ones may be one way out of the impasse where both are poorly handled and people regulary die because healthcare cost is out of their reach