Medical Insurance Subsidy

Exactly a year back my mother was in hospital. She was there for three weeks before she died. The bill for the three weeks came to close to four hundred thousand rupees. She was covered under my corporate medical insurance so I passed on the cost to the insurer, who paid most of it. I didn’t really complain, the insurer was obliged to pay, and the hospital was more than happy to receive the fee.

The hospital follows an interesting business model. On one hand it dons the garb of a corporate hospital while on the other it is a charitable hospital. A large section of the patients are treated at extremely low cost, or even for free. The rest of the patients have insurance coverage. Those that have coverage are fleeced, and this money effectively cross-subsidizes the treatment of the poor. All works out well for the hospital. Except..

Do you realize that when you (or, in most cases, your employer) pay your premium for medical insurance you’re not insuring just yourself? That because of hospitals like I just mentioned, your insurance is also effectively paying for the treatment of a larger population? That the cost of treating some random patient in the hospital you were admitted to is paid for by you, as part of your medical insurance premium?

Changing tracks, I think the best thing about India’s healthcare industry is the diversity. You have government hospitals. There are university hospitals. There are large corporate hospitals you wouldn’t think of stepping into unless you had insurance. There are charitable hospitals which treat you for next to no cost. There are the neighbourhood nursing homes which essentially cater to the uninsured middle class. Reasonable facilities but not too expensive. And so forth.

There is no formal system of medical insurance in the country. There is no single large government system. If the current state of healthcare in the country is one of not having evolved much, I really wouldn’t mind it remaining this way. I hope we never get into the kind of equilibria that the US and the UK have gotten themselves into, which appear efficient but which ultimately prove expensive for people.

It is the diversity in the system that keeps the healthcare industry here competitive, and keeps costs low. And of course, you pay for other people too when you pay your medical insurance premium.

3 thoughts on “Medical Insurance Subsidy”

  1. Absolutely. It is the abundance of choice that is the beauty of (urban) Indian healthcare. I hope we never get into the US kind of system. Come to think of it, US is full of examples of market failures – healthcare, transportation, suburban sprawl…

  2. I agree that we have diversity. Doesn’t really mean we have choice. Like you said a person wouldn’t dare step into the corporate hospitals unless they have insurance. Similarly a person wouldn’t get admitted in a govt. hospital unless they are really desperate (Rather they’ll find it hard to unless they bribe someone). Not to mention the unhygenic conditions. There are some big health insurance schemes (Yashaswini etc.) But in structure and ambition it is closer to the medicaid system in US rather than NHS in Britain. In actual implementation it is nowhere compared to either.

    And this subsidizing system seems to be some kind of redistributive justice and it is not hitting your pocket directly so I’m all for it.

    I don’t know if this is a general rule but a couple of big ones here in Mysore use this charitable work as a way of keeping up their occupancy rate (Is that the right phrase?)

  3. My friend Karthik Swaminathan (aka GP) was talking about how system where out-patient treamtment is not covered by insurance and only bigger cases are covered by insuance. That system might work in US given the constraints. In the US, even $20-$30 out-patient costs are covered by insurance companies. Annually, I dont think most people exceed $300-$500m (I guess). If that is handled by patient themselves, the cost of insurance will come down. That can get everyone to buy medical insurance and will put patients in real need for insurance on top (in theory) (disclaimer: this paragraph is based on unsubstanciated claims. I may be totally wrong :)).

    There is also economics-of-scale which works hugely in India’s favour. ( http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4493 ) I think it is in the interest of American medical industry to look for consumers in developing coutries so that their market grows and economics-of-scale come in play making health care cheaper for everyone. I am not even looking into philanthropy. Philanthropy is an added insentive. Of course, framing laws that make this easy is a political suicide.

    Malpractise insurance is also working against Americans ( http://www.washingtonpost.com/wp-dyn/content/article/2010/08/30/AR2010083003946.html ). That’s much harder to solve unless there are laws that protect doctors and yet are sympathetic to patients.

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