28/03/2017 11:55 AM IST | Updated 29/03/2017 9:04 AM IST

5 Reasons Why The Government Should Make Health Insurance Mandatory

Desmond Boylan / Reuters

Healthcare services are considered a non-negotiable necessity in most parts of the world, but in India they qualify as a privilege. If you have plenty of money to shell out there is no dearth of swanky private hospitals giving top-of-the-line care. But for the rest of the population, access to medical treatment means standing in a long queue all day at a government hospital, never mind how urgent their concern.

The Indian healthcare sector has been in an abysmal state since independence. And it has possibly only worsened in the recent past. According to government data, nearly 20% of the public health facilities in rural areas don't own their premises. Also, there was a shortage of around 7000 public health centres and nearly 2500 community health centres in India.

Buying a health cover is a much cheaper option for the poor than spending all their savings on treatment.

The government spending on healthcare has been more or less static, with nearly ₹39,000 crore being allocated in the Budget 2016. Back in FY15, the government's spending on public health had declined to ₹30,000 crore from ₹37,000 crore in FY14. According to a study by the Organisation for Economic Co-operation and Development, poorer economies had registered higher spending on healthcare than India that year.

However, until the government does not successfully provide the requisite infrastructure for creating a robust healthcare system in the county, it has to think of an alternate solution. And this can only be done if health insurance can be made mandatory. The following reasons will give us a clearer picture.

Rising cost of healthcare

Healthcare in India is prohibitively costly. Medical inflation is at very high rate. Every year the cost of the same treatment goes up by 12% on an average, which is more than regular inflation i.e. 7%.

For instance, if a typical heart surgery costs nearly ₹4 lakh today, then if medical inflation is at 12%, the cost of the same surgery will be roughly ₹4..5 lakh the next year and after five years, the cost would have gone up by a whopping 75%, thus making it ₹7 lakh. Do you think ₹7 lakh is anywhere close to affordable for most people? The rising cost of healthcare services has made it inaccessible for a large part of the population. Besides, In India, a substantial part of healthcare services is owned by private sector, which further worsens the situation.

The burgeoning BPL population

A lot of people in India end up becoming a part of the BPL section due to health-related issues. In fact, the proportion of the people who are getting added to this population has been rising substantially. According to the draft of the National Health Policy, over 63 million people face poverty due to major health problems every year. This is because when a health crisis hits them, they are often forced to use their entire life savings because of the high cost of healthcare. In such a case, buying a health cover becomes a much cheaper option than spending all their savings on treatment.

India offers pocket-friendly healthcare services to the rest of the world, but its own people have absolutely no or little access to good-quality healthcare services.

Today, health insurance costs approximately 3-4% of the total cost of the treatment of an ailment. For example, a health cover of ₹5 lakh will typically have a premium of ₹10,000-11,000 while the hospitalisation cost, on an average, will be around ₹2.5 lakh. It is difficult for an ordinary citizen, let alone somebody in the lower income group, to pay ₹2.5 lakh plus taxes at one go. However, a health cover of the same amount at just 4% of the hospitalisation cost will help the impoverished citizen manage the expenses incurred because of any future health crisis. Thus, for the population belonging to BPL or lower income groups, providing health insurance mandatorily can secure their futures.

The affluence mirage

There is one part of the population that cannot afford health insurance, but others don't "believe" in the concept. For the country's upper middle class that aspires for a better lifestyle with every passing day, spending ₹10,000 on a flight ticket does not pinch as much as spending the same amount or less on buying health insurance. The reason is simple—flights are a symbol of rising status while healthcare is an intangible asset that cannot be flaunted. For such people, making health insurance mandatory becomes imperative because the cost of healthcare will be rising exponentially (thanks to the medical as well as overall inflation), which will soon bite into their minimal increase in their incomes, thus making treatment unaffordable in the future. And the government must remember that this income group prefers and trusts the services of a swanky private hospital that can really burn a hole in the pockets.

Besides, it is expected that almost everybody will experience some sort of healthcare problem in the next 30 years. In fact, studies have suggested Indians are more prone to respiratory diseases (the rising levels of pollution will ensure this!) as well as lifestyle conditions such as hypertension. With a sedentary lifestyle for most, the government might want to make purchasing a health insurance plan mandatory as it will not be able to afford another set of people quietly slipping into lower income group.

Bridge the gap between quality and cost

Sadly, while India can boast of offering cheap and pocket-friendly healthcare services to the rest of the world, its own people have absolutely no or little access to good-quality healthcare services. This again boils down to the exorbitant cost of treatments in most hospitals. Yes, there are government hospitals that offer services at subsidised costs—however, the growing population belonging to either BPL or low-income group has been doubling at much faster rate, thus amplifying the problem at hand.

It is expected that almost everybody will experience some sort of healthcare problem in the next 30 years.

According to statistics, the average increase in hospitalisation cost has been around 10.1% CAGR in rural areas and 10.7% in urban areas respectively. Some reports have suggested that a large part the population in the rural pockets of states such as Delhi, Punjab, Uttar Pradesh, Maharashtra and Haryana prefer going to private hospitals because of better services.

A similar picture can be seen in urban areas of these states, where people broadly prefer private over government hospitals because of the quality of the treatment. This sorry state of affairs in a government setup will take time to change; however, the government can definitely work on alternatives such as providing health insurance in order to ease the burden of healthcare costs for the aam junta in a private hospital.

Taking a leaf from others' books

Lastly, it's a good idea to learn from others if they're doing something better. Healthcare is no exception. There are countries in the world that have made mandatory health insurance a reality and their citizens are hugely benefitted by this. Switzerland has mandatory health insurance irrespective of age or medical condition of its citizens. United States has Obamacare wherein poor, marginalised sections and senior citizens are insured by the government while for others, health insurance is made mandatory to buy. Germany also has mandatory healthcare insurance.

When we talk about India and health insurance, the scenario is quite dismal, with just 17% of population insured. The statistics need to change drastically, and soon. And unless healthcare becomes affordable and accessible to all, India can never truly develop.

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