The Rise and Risks of Health Insurance in India
Kartavya Desk Staff
Syllabus: Economy
Source: TH
Context: The debate on India’s path to Universal Health Care (UHC) has intensified with rising budgets for PMJAY and State Health Insurance Programmes (SHIPs). Critics argue that these insurance-driven models reinforce for-profit healthcare and neglect public health infrastructure.
About The Rise and Risks of Health Insurance in India:
Introduction:
Universal Health Care (UHC), envisioned by the Bhore Committee (1946), remains distant for India even after eight decades. While PMJAY and SHIPs have expanded formal coverage to over 80% of the population, they raise questions about sustainability, equity, and the future of India’s public health system.
Growth of Health Insurance in India:
• PMJAY (2018): Provides ₹5 lakh cover per household per year for inpatient care, covering 58.8 crore individuals (2023-24).
• State Schemes (SHIPs): Most states run parallel programmes, together covering a similar population with budgets of ~₹16,000 crore.
• Combined Expenditure: ~₹28,000 crore annually, growing at 8–25% in real terms (2018–2024).
• Coverage vs Utilisation: While official coverage is high, only 35% of insured hospital patients could actually use the schemes (HCES 2022-23).
Fault Lines in Health Insurance Expansion
• For-Profit Medicine Bias ~2/3 of PMJAY funds flow to private hospitals, reinforcing commercialised healthcare. Lack of strong regulation leads to overcharging, unnecessary procedures, and ethical compromises.
• ~2/3 of PMJAY funds flow to private hospitals, reinforcing commercialised healthcare.
• Lack of strong regulation leads to overcharging, unnecessary procedures, and ethical compromises.
• Neglect of Primary Care Insurance skews resources towards hospitalisation, ignoring primary and preventive health services. With India’s ageing population, tertiary care costs risk crowding out investments in rural PHCs and OPD services.
• Insurance skews resources towards hospitalisation, ignoring primary and preventive health services.
• With India’s ageing population, tertiary care costs risk crowding out investments in rural PHCs and OPD services.
• Utilisation Challenges Awareness gaps: beneficiaries often do not know how to use coverage. Private hospitals discourage insurance patients due to low reimbursement rates. Disadvantaged groups face greater barriers.
• Awareness gaps: beneficiaries often do not know how to use coverage.
• Private hospitals discourage insurance patients due to low reimbursement rates.
• Disadvantaged groups face greater barriers.
• Discrimination in Care Public hospitals prefer insured patients (extra funds). Private hospitals prefer uninsured patients (higher billing). Leads to inequity within the healthcare system.
• Public hospitals prefer insured patients (extra funds).
• Private hospitals prefer uninsured patients (higher billing).
• Leads to inequity within the healthcare system.
• Financial Sustainability & Provider Exit Pending dues under PMJAY: ₹12,161 crore, exceeding its budget. Over 600 hospitals have exited PMJAY due to delays in reimbursements.
• Pending dues under PMJAY: ₹12,161 crore, exceeding its budget.
• Over 600 hospitals have exited PMJAY due to delays in reimbursements.
• Fraud & Corruption NHA flagged 3,200 hospitals for fraudulent activities (ghost patients, inflated bills, unnecessary surgeries). Weak audit systems, lack of transparency in scheme portals.
• NHA flagged 3,200 hospitals for fraudulent activities (ghost patients, inflated bills, unnecessary surgeries).
• Weak audit systems, lack of transparency in scheme portals.
Structural Risks for UHC
• Underfunded Public Health: India’s public expenditure on health is just 1.3% of GDP (2022) vs world average 6.1%.
• Profit-Driven System: Insurance strengthens private sector dominance without addressing quality gaps.
• Exclusionary Tendencies: Despite high coverage, out-of-pocket expenditure remains one of the highest globally.
International Comparisons
• Thailand, Canada: Social health insurance is a part of UHC but built on non-profit providers, universal coverage, and strong regulation.
• India’s Difference: Insurance is targeted, profit-oriented, and poorly regulated, unlike successful models abroad.
Policy Way Forward
• Strengthen Public Health Infrastructure Expand primary health centres, diagnostics, OPD services, and rural health workforce. Prioritise preventive care over hospitalisation-centric funding.
• Expand primary health centres, diagnostics, OPD services, and rural health workforce.
• Prioritise preventive care over hospitalisation-centric funding.
• Regulate Private Sector Enforce standard treatment protocols, price caps, and strict monitoring of empanelled hospitals.
• Enforce standard treatment protocols, price caps, and strict monitoring of empanelled hospitals.
• Improve Utilisation & Awareness Community outreach and digital literacy to help beneficiaries navigate schemes. Simplify claims and grievance redressal systems.
• Community outreach and digital literacy to help beneficiaries navigate schemes.
• Simplify claims and grievance redressal systems.
• Financial Sustainability Ensure timely reimbursement; explore direct budgetary allocations instead of insurance intermediaries.
• Ensure timely reimbursement; explore direct budgetary allocations instead of insurance intermediaries.
• Towards True UHC Raise public health spending to 2.5% of GDP (National Health Policy 2017 target). Move from insurance-driven patchwork to publicly funded, universally accessible healthcare.
• Raise public health spending to 2.5% of GDP (National Health Policy 2017 target).
• Move from insurance-driven patchwork to publicly funded, universally accessible healthcare.
Conclusion:
Health insurance schemes such as PMJAY and SHIPs provide temporary relief but risk institutionalising a profit-driven, hospitalisation-heavy system. True UHC requires public investment in primary care, regulation of private providers, and equity-focused reforms. Without these, health insurance remains a painkiller, not a cure, for India’s ailing healthcare system.