Myth of coverage: Household burden of COVID-19 treatment was several times higher than government spending

Average insurance claim settled during pandemic months was 3 times that before the pandemic

By Shagun, Ranju Dodum, Priya Ranjan Sahu
Published: Wednesday 12 January 2022

The average settlement amount for health insurance claims in India during the novel coronavirus disease (COVID-19) pandemic increased substantially, according to public health experts. This, they said, suggested that hospitals overcharged patients.

The average claim settled during this period was between Rs 99,000 and Rs 100,000. This is over three times the average claim settled before the pandemic, which was around Rs 39,000, said Mayur Trivedi, associate professor at the Indian Institute of Public Health, Delhi. 

Trivedi calculated the numbers based on Insurance Regulatory and Development Authority (IRDAI) data of total claim amount and the number of claims.

Professor Manoj Kumar of the Jawaharlal Nehru University, Delhi did a survey of 400 people on expenditure incurred for COVID-19 treatment. He found that the expenditure on COVID-19 surpassed even treatments for heart and lung diseases combined in normal times. 

The average cost of COVID-19 treatment was Rs 1,12,179 in government hospitals and Rs 2,97,577 in private hospitals. Before the pandemic, the cost for all symptoms combined like fever due to unknown origin, respiratory issues with or without fever, and heart diseases, chest pain, and breathlessness was Rs 4,622 in government hospitals and Rs 28,932 in private hospitals. 

As a result, insurers are demanding re-pricing of policies from IRDAI, claiming that they are incurring losses. In fact, this year, many insurers have stopped selling or renewing Corona Kavach (an indemnity health insurance policy specially designed to cover the hospitalisation & medical expenses arising out of Covid-19) policies. 

A survey of 11 insurance companies by Beshak, an online insurance comparison platform, showed at least seven have either stopped renewing or selling the policy despite offering it on their websites. 

While insurance companies blame the pandemic for the poor show, their claim-settlement ratio during the pre-COVID-19 times was also not encouraging. 

Only 56.51 per cent of the inpatient medical expenditure in 2017-18 was reimbursed on insurance policy arranged by individual households from insurance companies, while the balance 43.5 per cent had to be paid from their own pocket, according to estimates by the 75th Health Round of National Sample Survey Office 2017-18.

The share of reimbursements made under the Central Government Health Scheme and the Employment State Insurance Scheme, which now outsource a large proportion of hospitalisations to the private sector, was also low at 49.57 per cent and 47.92 per cent in 2017-18, indicating over half of the inpatient care expenditure was not settled even under employer-based social insurance schemes. 

Poor signs 

Health experts said the government cannot rely only on insurance to achieve universal health coverage. “Even at the time of crisis, the government was not able to regulate the private sector. This is telling because usually during times of crisis, the government temporarily gives a lot of powers to district collectors and other officials, and still the machinery failed to check the rampant malpractices committed by the private players,” said Sulakshana Nandi, national joint convenor of Delhi-based nonprofit network Jan Swasthya Abhiyan. 

Experts claim that if the government fails to spend on healthcare, the entire burden is shifted to the people. Indian households still pay 63 per cent of their health expenditures from their own pocket, according to the 57th round of National Sample Survey. 

This is required because of the minuscule government expenditure (1.18 per cent of GDP) on health, which leaves many primary health centres, sub-divisional and district hospitals dysfunctional. This is among the reasons the country’s health system could not handle the COVID-19 load. 

Overall, households collectively spent 3.6 times more money on COVID-19 treatment (excluding testing), as compared to the government. Its impact was also felt in non-COVID-19 hospitalisations during the pandemic. 

Economic Survey 2020-21 noted that an increase in public health expenditure from the current 1 per cent to 3 per cent of GDP can reduce out-of-pocket (OOP) expenditure by half. “OOP for health increases the risk of vulnerable groups slipping into poverty because of catastrophic health expenditures,” it stated. 

It added that an increase in government healthcare spending over a decade in varied countries such as China, Indonesia, the Philippines, Pakistan and Thailand significantly decreased OOP expenditures. 

There is another clear trend that emerged from the pandemic — states that were quick to act fought the virus better. In Arunachal Pradesh, for example, the government channelised its Emergency Response and Health System Preparedness Package worth Rs 141.94 crore to prepare for the pandemic.

As a result, the state managed to set up 32 COVID-19 health centres (326 beds), 66 COVID-19 care centres (2,497 beds), 383 quarantine facilities (13,411 beds) and two dedicated COVID-19 hospitals before the second wave. The network of hospitals also aided in providing free vaccinations for all. 

The government claims that 75 per cent of the state’s eligible population has received their first vaccine and another 39 per cent has received both dosages. The success can be gauged from the fact that not a single person availed PM-JAY in the state even though almost 89,000 families are covered under it. Odisha is another state that handled the crisis better than most others.

Though the state has its own health assurance scheme called Biju Swasthya Kalyan Yojana for coverage of poor people, its focus has been on building dedicated COVID-19 hospitals and setting up health infrastructure since the onset of the pandemic. 

On March 27, 2020, when the state had reported just three COVID-19 positive cases, the government announced setting up of two dedicated hospitals each with a capacity of 500 beds in Bhubaneswar in partnership with two private medical educational institutions. 

The government was also prompt in organising training of doctors and paramedics in all districts. If the government is serious about its goal of ensuring universal healthcare, it needs to increase its investments on public healthcare. 

This is the fourth and final part in a reported series on the effectiveness of government and private health insurance schemes in India. Also read the firstsecond and third parts. It first appeared in the December 16-31 print edition of Down To Earth.

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