An ‘Obamacare’ model for India

The Patient Protection and Affordable Care Act of the US, on which rested the very prestige and credibility of President Barack Obama, recently got the imprimatur of the US Supreme Court, though with a wafer-thin majority.

The law mandates every US citizen to have health insurance, come 2014.

While this is its nasty side, its humane side is that the state will mandatorily buy health insurance policies for those unable to afford them — people with income that is less by 133 per cent or more of the federal poverty level — under the scheme called Medicaid.

Employers with more than 25 employees must buy health insurance policies for the latter. Health insurance, that has always been the lynchpin of the US healthcare system, has thus received the official imprimatur.

The law seeks to tame the rapaciousness and cupidity of the insurers by reading the riot act to them — spend not less than 80 per cent of the premium collections on reimbursing medical expenses of the insured.

The wily insurers for good measure allow themselves enough wiggle room by writing in a lengthy exclusion clause. ‘Obamacare’ takes care to curtail this wiggle-room by expressly closing the favourite escape routes, such as maternity and gynaecological expenses.

Cross subsidy issue

Health insurance can be politely defined as pooling of risk, and bluntly as the best example of cross-subsidy. Youngsters pay lesser premium but correspondingly carry a considerably lesser risk of falling sick.

The older ones, on the other hand, willy-nilly have to pay a higher premium but constitute a high risk segment as far as insurers are concerned. The seething resentment of the youngsters against this order can be contained by tweaking health insurance plans in their favour — for instance, offering a no-claim bonus, or a hefty rebate on their premium during the later stage of their life when premium climbs steeply.

In India, insurance penetration is very low and health insurance penetration is lower still, despite income-tax incentives — separate deduction up to Rs 15,000 for the nuclear family and Rs 20,000 for taking a health cover on senior citizen parents, which is understandable given the very low tax paying populace.

Perhaps, the no-claim bonus can overcome the existing indifference. In a country where two-in-one products are a rage with customers, a health-cum-life cover can turn out to be what the doctor ordered — a sweetener in the form of life cover for parents at no extra cost.

To be sure, the size of the cover cannot be egregiously large, given the nature of the product, but enough to enliven the interest of youngsters.

Rogue hospitals

Obamacare, however, has nothing concrete to offer on taming rogue hospitals and the incorrigible medical fraternity.

It is common knowledge that hospitals and medical practitioners salivate on seeing patients with health insurance.

It is a chance to milk the insurance company dry. In the name of defensive medication to save their skin from law suits against medical negligence, all conceivable tests, no matter what their relevance, are ordered without batting an eyelid. The patient normally does not lose sleep over the hospital’s avarice, as he is secure in the knowledge that the tab will be picked up by the insurer. But in the long run, this tendency does have a deleterious effect on him, as the cost of insurance is bound to climb.

The government obviously would be at its wits’ end reining in the hospitals, because the dividing line between genuine diagnostic tests and those not required can only be discerned by those well-versed in medicine.

Subsidy burden

The mandatory health insurance route or Obamacare would entail a heavy subsidy in India, given the extent of poverty. The State governments would have to shoulder a sizeable burden.

To make this possible, the government should eliminate ill-conceived subsidies.

The Food Security Bill seeking to run giant kitchens across the country is a case in point.

Health insurance is a lesser evil, compared with the extreme options of casting the poor to the wolves, or the utopian model of nationalising the health sector.

(The author is a New Delhi-based chartered accountant)

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