How the Lack of Information Can Affect Health Insurance Schemes
18 July 2019
The roll-out of the Pradhan Mantri Jan Arogya Yojana (PMJAY) has been a frenetic affair (over 4 crore e-cards issued in less than 10 months). PMJAY is a massive health insurance scheme which aims to protect poor and deprived families from catastrophic expenditure arising out of health shocks by providing up to ₹5 lakh as cover. The apparatus for the scheme is complicated with several moving parts – private and public hospitals, insurance agencies, government-run trusts, a cadre of 1 lakh frontline workers, and over 50 crore insurees.
Running a health insurance scheme of this magnitude requires the availability of a vast amount of information – on who can provide quality health services, who is eligible to avail claims, which illnesses are covered, who requires what treatment, etc. However, access to information is limited as it is not a freely available public good, and usually one individual or group possesses more information than others.
Information asymmetry can be defined as a situation wherein one party in a transaction possesses more information and knowledge than the other party. Information asymmetry is intrinsic to everyday life. It is practically impossible for both parties in a conversation, exchange, or transaction to possess the exact same level of information. One party possessing more information than the other can enable that party defrauding or taking advantage of the other party.
One of the fundamental problems in healthcare systems across the world is the vast information asymmetry that exists between doctors and patients. Doctors obviously know more about medical practices than their patients due to their extensive educational background and training. Hence, patients facing life threatening illnesses need to believe, and do believe, that the power of physicians is greater than it actually is.
The lack of medical knowledge among people, in some cases, puts them in vulnerable positions prone to abuse and exploitation by a profit-minded healthcare provider. In India, widespread illiteracy and the absence of basic medical knowledge makes matters even worse. The imbalance of information thus leads to a power imbalance.
It is crucial to pay attention to regulatory measures and awareness generation if we are to see the scheme achieve its full potential.
One such example is that of Caesarean Section Deliveries. In India, caesarean section rates are amongst the fastest rising in the world and are much higher in private institutions than in public institutions, with information asymmetry and profit seeking by private institutions being contributing factors. Over 40% of all deliveries in the private sector are C-section while the same is only 11.9% in the public sector (National Family Health Survey-4, 2015-16). The proportion of C-section deliveries in the private sector are much higher than the WHO recommended maximum limit of 15%. In the states, the proportion of C-section deliveries are as high as 58% in Telangana, and in Andhra Pradesh they are more than 40%.
Most women are unaware of the health implications of a C-section.
Though C-sections are crucial under certain medical conditions, a rate as high as 40% is virtually impossible to attain if C-sections are conducted based solely on medical evidence. The disastrous consequences are listed in a 2018 report in The Lancet, which pointed out that unnecessary caesarean sections increase the prevalence of maternal and child mortality and morbidity.
A cautious note on health insurance
Health insurance can complicate matters. When individuals have tight budget constraint or have less to spend, they are far more vigilant while spending. With health cover, that budget constraint is lifted, and people are willing to spend more. The Lancet study points out people with more money are likelier to spend on a procedure like a C-section, even when it may not be necessary. Therefore, the fact that people have more to spend on their healthcare is welcome, but the accompanying challenges within the context of an information imbalance (discussed above) must be acknowledged and addressed.
Insurance coverage increases a person’s health budget, and they are tempted to go to an expensive, private hospital. As per the National Health Family Survey 2015, 55% of households prefer private hospitals over public hospitals. Apart from the poor infrastructure and poor quality of services provided by public hospitals, the perception of high cost treatment as quality treatment contributes to this trend.
Package rates under PMJAY are fixed, so people may not exhaust their cover by going to a private hospital but are likely to incur higher out-of-pocket expenditure. This is because several health issues require multiple check-ups that typically occur 15 days after hospitalisation ends, the point after which outpatient care is no longer covered by PMJAY. Non-hospitalised treatment is far costlier in private hospitals, compared to government hospitals. While some outpatient care costs are covered, people may inadvertently spend more than they want to, if they aren’t provided adequate information about treatment options and the costs involved upfront. In some cases, this may lead to people having to borrow, or worse, stop treatment.
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Furthermore, insurees are rarely aware of the services covered under the health insurance schemes. Both RSBY and PMJAY provide insurance coverage only for hospitalisation expenses and day care surgeries. Consultation fees, costs of diagnostic tests, expenses on medicine have to be paid by the patient if it doesn’t lead to hospitalisation. This is damaging especially if one is unclear about terms and conditions of insurance and has false expectations about what is covered. This situation breeds mistrust and resentment. There have been many instances reported of insurees feeling denied of insurance benefits they feel are due to them. People may be unwilling to use health insurance, even though they acknowledge the risks and rising costs of healthcare.
Thus, given that lives are at stake, information asymmetry in medicine and health needs to be addressed with greater incisiveness. There are some ways to bridge these information gaps.
Steps to address the issue
Firstly, ‘trust’ has a role to play in managing the problem of information asymmetry. For the system to work, people need to trust that doctors will provide the right care and that the government will ensure that those eligible will receive cover, etc. Fraud and medical malpractices are a feature of health insurance schemes across the world. Therefore, to build trust, the government needs to act as a strong regulator.
Under PMJAY, an anti-fraud cell has been set up at the national level and officers under the cell are responsible for assessing fraud management capacity of states, liaising with anti-fraud cells of SHAs and developing state specific recommendations to strengthen anti-fraud measures. District Vigilance and Investigation officers under SHA undertake fraud investigations to ensure strict compliance to beneficiary identification, hospital empanelment and pre-authorisation guidelines. Additionally, a grievance cell and helpline has been set up. Their work will not be easy. While the government has put regulatory mechanisms in place, deep-rooted and systemic corruption is likely to pose a challenge to the implementation and enforcement of anti-fraud provisions exacerbated by weak capacity of the union and state governments.
Providing information directly to users is another option. People who reach empanelled hospitals can talk to Pradhan Mantri Arogya Mitras, the frontline cadre for PMJAY. However, if one wants to reach people, especially in the most deprived areas of the country, then the existing cadre of frontline health workers should be mobilised. Training frontline workers like Anganwadi Workers, ASHAs, and Auxiliary Nurse Midwives to disseminate information and interact closely with beneficiaries has been a step towards behaviour change in the domain of health, especially in rural India.
The functions and mandate of ASHAs, ANMs and Anganwadi workers can be expanded to include generating awareness about health insurance schemes. Visual aids and refresher training can be used to simplify complex information and improve retention, and providing frontline workers with pictorial job aids will assist them in conveying information effectively. However, frontline workers are often overworked and underpaid, and it is necessary to address these issues. Reaching out to several people at their homes is a mammoth task and expecting frontline workers to conduct this exercise on top of their other work might be unfair.
The stakes are high, and only time will tell whether health insurance in India can successfully deal with informational asymmetry. It is, however, crucial to pay attention to regulatory measures and awareness generation if we are to see the scheme achieve its full potential.
Ritwik is a Research Associate at Accountability Initiative and Shaivya is an intern.